Related papers: Dynamic trading under integer constraints
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
In this paper we extend discrete time semi-static trading strategies by also allowing for dynamic trading in a finite amount of options, and we study the consequences for the model-independent super-replication prices of exotic derivatives.…
We develop the fundamental theorem of asset pricing in a probability-free infinite-dimensional setup. We replace the usual assumption of a prior probability by a certain continuity property in the state variable. Probabilities enter then…
In this study, we investigate asset price bubbles in a discrete-time, discrete-state market under model uncertainty and short sales prohibitions. Building on a new fundamental theorem of asset pricing and a superhedging duality in this…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction…
For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. We propose a new approach for estimating the super-replication cost based on convex duality…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
Most insurance contracts are inherently linked to financial markets, be it via interest rates, or -- as hybrid products like equity-linked life insurance and variable annuities -- directly to stocks or indices. However, insurance contracts…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
How to compute (super) hedging costs in rather general fi- nancial market models with transaction costs in discrete-time ? Despite the huge literature on this topic, most of results are characterizations of the super-hedging prices while it…
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…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
The continuous time model of dynamic asset trading is the central model of modern finance. Because trading cannot in fact take place at every moment of time, it would seem desirable to show that the continuous time model can be viewed as…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…