Related papers: Game-Theoretic Capital Asset Pricing in Continuous…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs.…
This paper establishes a non-stochastic analogue of the celebrated result by Dubins and Schwarz about reduction of continuous martingales to Brownian motion via time change. We consider an idealized financial security with continuous price…
This note studies the behavior of an index I_t which is assumed to be a tradable security, to satisfy the BSM model dI_t/I_t = \mu dt + \sigma dW_t, and to be efficient in the following sense: we do not expect a prespecified trading…
This paper presents an empirical analysis of the capital asset pricing model using trading data for the Chinese A-share market from 2000 to 2019. Firstly, the standard CAPM is tested using a Fama-MacBetch regression and although the results…
We present conditions under which positive alpha exists in the realm of active portfolio management- in contrast to the controversial result in Jarrow (2010, pg. 20) which implicates delegated portfolio management by surmising that positive…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
Although the CML (Capital Market Line), the Intertemporal-CAPM, the CAPM/SML (Security Market Line) and the Intertemporal Arbitrage Pricing Theory (IAPT) are widely used in portfolio management, valuation and capital markets financing;…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
We introduce a general framework for continuous-time betting markets, in which a bookmaker can dynamically control the prices of bets on outcomes of random events. In turn, the prices set by the bookmaker affect the rate or intensity of…
This note continues investigation of randomness-type properties emerging in idealized financial markets with continuous price processes. It is shown, without making any probabilistic assumptions, that the strong variation exponent of…
We consider an arbitrage-free, discrete time and frictionless market. We prove that an investor maximising the expected utility of her terminal wealth can always find an optimal investment strategy provided that her dissatisfaction of…
We study optimal investment problems under the framework of cumulative prospect theory (CPT). A CPT investor makes investment decisions in a single-period financial market with transaction costs. The objective is to seek the optimal…
This paper introduces an agent-based artificial financial market in which heterogeneous agents trade one single asset through a realistic trading mechanism for price formation. Agents are initially endowed with a finite amount of cash and a…
The Capital Asset Pricing Model (CAPM) is one of the original models in explaining risk-return relationship in the financial market. However, when applying the CAPM into reality, it demonstrates a lot of shortcomings. While improving the…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…