Related papers: No-arbitrage implies power-law market impact and r…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
In this paper, we build tests for the presence of residual noise in a model where the market microstructure noise is a known parametric function of some variables from the limit order book. The tests compare two distinct quasi-maximum…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
We investigate present some new statistical properties of order books. We analyse data from the Nasdaq and investigate (a) the statistics of incoming limit order prices, (b) the shape of the average order book, and (c) the typical life time…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
We study the temporal fluctuations in time-dependent stock prices (both individual and composite) as a stochastic phenomenon using general techniques and methods of nonequilibrium statistical mechanics. In particular, we analyze stock price…
We characterize absence of arbitrage with simple trading strategies in a discounted market with a constant bond and several risky assets. We show that if there is a simple arbitrage, then there is a 0-admissible one or an obvious one, that…
In this work we present a general representation formula for the price of a vulnerable European option, and the related CVA in stochastic (either rough or not) volatility models for the underlying's price, when admitting correlation with…
We study an optimal execution problem in a continuous-time market model that considers market impact. We formulate the problem as a stochastic control problem and investigate properties of the corresponding value function. We find that…
Price without transaction makes no sense. Trading volume authenticates its corresponding price, so there exist mutual information and correlation between price and trading volume. We are curious about fractal features of this correlation…
We show that the leading power corrections to the event shape distributions can be resummed into nonperturbative shape functions that do not depend on the center-of-mass energy and measure the energy flow in the final state. In the case of…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…
In this comment we discuss the problem of reconciling the linear efficiency of price returns with the long-memory of supply and demand. We present new evidence that shows that efficiency is maintained by a liquidity imbalance that co-moves…
We apply Geometric Arbitrage Theory to obtain results in Mathematical Finance, which do not need stochastic differential geometry in their formulation. First, for a generic market dynamics given by a multidimensional It\^o's process we…
Rough volatility models have gained considerable interest in the quantitative finance community in recent years. In this paradigm, the volatility of the asset price is driven by a fractional Brownian motion with a small value for the Hurst…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…