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We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on…
This paper introduces a novel robust trading paradigm, called \textit{multi-double linear policies}, situated within a \textit{generalized} lattice market. Distinctively, our framework departs from most existing robust trading strategies,…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
Investment approaches in financial instruments have been varied and often produce unpredictable results. Many investors in the earlier days of investment banking suffered catastrophical losses due to poor strategy and lack of understanding…
We introduce weighted finite finance automata (WFFA), a formal framework for modeling and analyzing quantitative properties of financial systems driven by uncertain economic variables such as stock prices, interest rates, and exchange…
Technical and fundamental analysis are traditional tools used to analyze individual stocks; however, the finance literature has shown that the price movement of each individual stock correlates heavily with other stocks, especially those…
We unify and establish equivalence between the pathwise and the quasi-sure approaches to robust modelling of financial markets in discrete time. In particular, we prove a Fundamental Theorem of Asset Pricing and a Superhedging Theorem,…
Using a large-scale Deep Learning approach applied to a high-frequency database containing billions of electronic market quotes and transactions for US equities, we uncover nonparametric evidence for the existence of a universal and…
We introduce a solution scheme for portfolio optimization problems with cardinality constraints. Typical portfolio optimization problems are extensions of the classical Markowitz mean-variance portfolio optimization model. We solve such…
Functional data analysis is a fast evolving branch of statistics. Estimation procedures for the popular functional linear model either suffer from lack of robustness or are computationally burdensome. To address these shortcomings, a…
The paper generalizes the construction by stochastic flows of consistent utility processes introduced by M. Mrad and N. El Karoui in (2010). The utilities random fields are defined from a general class of processes denoted by $\GX$. Making…
The Markowitz problem consists of finding in a financial market a self-financing trading strategy whose final wealth has maximal mean and minimal variance. We study this in continuous time in a general semimartingale model and under cone…
By elaborating on the notion of linear belief functions (Dempster 1990; Liu 1996), we propose an elementary approach to knowledge representation for expert systems using linear belief functions. We show how to use basic matrices to…
This paper outlines an agent-based model of a simple financial market in which a single asset is available for trade by three different types of traders. The model was first introduced in the PhD thesis of one of the authors, see reference…
We study the effect of investor inertia on stock price fluctuations with a market microstructure model comprising many small investors who are inactive most of the time. It turns out that semi-Markov processes are tailor made for modelling…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
In this paper, we introduce a numeraire-free and original probability based framework for financial markets. We reformulate or characterize fair markets, the optional decomposition theorem, superhedging, attainable claims and complete…
To profit from price oscillations, investors frequently use threshold-type strategies where changes in the portfolio position are triggered by some indicators reaching prescribed levels. In this paper, we investigate threshold-type…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
This note provides a neat and enjoyable expansion and application of the magnificent Ordentlich-Cover theory of "universal portfolios." I generalize Cover's benchmark of the best constant-rebalanced portfolio (or 1-linear trading strategy)…