Related papers: Dynamic trading under integer constraints

A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…

We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…

Assuming frictionless trading, classical stochastic portfolio theory (SPT) provides relative arbitrage strategies. However, the costs associated with real-world execution are state-dependent, volatile, and under increasing stress during…

The principle of absence of arbitrage opportunities allows obtaining the distribution of stock price fluctuations by maximizing its information entropy. This leads to a physical description of the underlying dynamics as a random walk…

The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…

This paper is concerned with asymptotic behavior of a variety of functionals of increments of continuous semimartingales. Sampling times are assumed to follow a rather general discretization scheme. If an underlying semimartingale is…

A continuous-path semimartingale market model with wealth processes discounted by a riskless asset is considered. The numeraire portfolio is the unique strictly positive wealth process that, when used as a benchmark to denominate all other…

We discuss the no-arbitrage conditions in a general framework for discrete-time models of financial markets with proportional transaction costs and general information structure. We extend the results of Kabanov and al. (2002), Kabanov and…

We derive deterministic criteria for the existence and non-existence of equivalent (local) martingale measures for financial markets driven by multi-dimensional time-inhomogeneous diffusions. Our conditions can be used to construct…

We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…

We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…

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 revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…

We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…

In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation…

We study the superreplication of contingent claims under model uncertainty in discrete time. We show that optimal superreplicating strategies exist in a general measure-theoretic setting; moreover, we characterize the minimal…

Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…

In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…

A new model for stocks markets using integer values for each stock price is presented. In contrast with previously reported models, the variables used in the model are not of binary type, but of more general integer type. It is shown how…

We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…