Related papers: No arbitrage and lead-lag relationships
We consider a multi-asset incomplete model of the financial market, where each of $m\geq 2$ risky assets follows the binomial dynamics, and no assumptions are made on the joint distribution of the risky asset price processes. We provide…
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…
The capitalization-weighted total relative variation $\sum_{i=1}^d \int_0^\cdot \mu_i (t) \mathrm{d} \langle \log \mu_i \rangle (t)$ in an equity market consisting of a fixed number $d$ of assets with capitalization weights $\mu_i (\cdot)$…
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…
Several structural results for the set of competitive equilibria in trading networks with frictions are established: The lattice theorem, the rural hospitals theorem, the existence of side-optimal equilibria, and a…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…
A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is…
Difference-in-differences is a widely-used evaluation strategy that draws causal inference from observational panel data. Its causal identification relies on the assumption of parallel trends, which is scale dependent and may be…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
In the theory of riskfree hedges in continuous time finance, one can start with the delta-hedge and derive the option pricing equation, or one can start with the replicating, self-financing hedging strategy and derive both the delta-hedge…
The existence of a semiconjugate relation permits the transformation of a higher order difference equation on a group into an equivalent triangular system of two difference equations of lower orders. Introducing time-dependent form…
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 study which data can be induced by a correlated equilibrium given a known finite simultaneous move game. We assume that an analyst has access to the frequency of each agent's actions but does not have access to the…
Investigating the relationship, particularly the lead-lag effect, between time series is a common question across various disciplines, especially when uncovering biological process. However, analyzing time series presents several…
We construct a binary market model with memory that approximates a continuous-time market model driven by a Gaussian process equivalent to Brownian motion. We give a sufficient conditions for the binary market to be arbitrage-free. In a…
We generalize the results of Bielecki and Rutkowski (2015) on funding and collateralization to a multi-currency framework and link their results with those of Piterbarg (2012), Moreni and Pallavicini (2017), and Fujii et al. (2010b). In…
In this paper an arbitrage strategy is constructed for the modified Black-Scholes model driven by fractional Brownian motion or by a time changed fractional Brownian motion, when the volatility is stochastic. This latter property allows the…
In multivariate time series systems, key insights can be obtained by discovering lead-lag relationships inherent in the data, which refer to the dependence between two time series shifted in time relative to one another, and which can be…
The study of time series has motivated many researchers, particularly on the area of multivariate-analysis. The study of co-movements and dependency between random variables leads us to develop metrics to describe existing connection…
We show that the lack of arbitrage in a model with both fixed and proportional transaction costs is equivalent to the existence of a family of absolutely continuous single-step probability measures, together with an adapted process with…