Related papers: Shorting in Speculative Markets
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
We consider a stochastic game between a trader and a central bank in a target zone market with a lower currency peg. This currency peg is maintained by the central bank through the generation of permanent price impact, thereby aggregating…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
We prove the existence of a continuous-time Radner equilibrium with multiple agents and transaction costs. The agents are incentivized to trade towards a targeted number of shares throughout the trading period and seek to maximize their…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…