Related papers: No arbitrage and lead-lag relationships

We define data-driven macroeconomic regimes by clustering the relative performance in time of indices belonging to different asset classes. We then investigate lead-lag relationships within the regimes identified. Our study unravels market…

This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…

We explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby…

We show that with suitable restrictions on allowable trading strategies, one has no arbitrage in settings where the traditional theory would admit arbitrage possibilities. In particular, price processes that are not semimartingales are…

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 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 develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…

In time-series analysis, the term "lead-lag effect" is used to describe a delayed effect on a given time series caused by another time series. lead-lag effects are ubiquitous in practice and are specifically critical in formulating…

An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…

It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…

Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of…

It is assumed that under suitable economic and information-theoretic conditions, market exchange rates are free from arbitrage. Commodity markets in which trades occur over a complete graph are shown to be trivial. We therefore examine the…

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 objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…

In a semimartingale financial market model, it is shown that there is equivalence between absence of arbitrage of the first kind (a weak viability condition) and the existence of a strictly positive process that acts as a local martingale…

We study a financial market where the risky asset is modelled by a geometric It\^o-L\'{e}vy process, with a singular drift term. This can for example model a situation where the asset price is partially controlled by a company which…

In this article we present a continuous time model for natural gas and crude oil future prices. Its main feature is the possibility to link both energies in the long term and in the short term. For each energy, the future returns are…

We consider model-free pricing of digital options, which pay out if the underlying asset has crossed both upper and lower barriers. We make only weak assumptions about the underlying process (typically continuity), but assume that the…

We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…

Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…