Related papers: Classifying Financial Markets up to Isomorphism
We consider a financial market where the asset price follows a fractional Brownian motion. We introduce a family of investment strategies, and quantify profit possibilities for both persistent and antipersistant markets.
In this paper, we test a partially segmented ICAPM for two developed markets, two emerging markets and World market, using an asymmetric extension of the multivariate GARCH process of De Santis and Gerard (1997,1998). We find that this…
Financial markets across all asset classes are known to exhibit trends. These trends have been exploited by traders for decades. Here, we empirically measure when trends revert, based on 30 years of daily futures prices for equity indices,…
An open market is a subset of an entire equity market composed of a certain fixed number of top capitalization stocks. Though the number of stocks in the open market is fixed, the constituents of the market change over time as each…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
We analyze multiline pricing and capital allocation in equilibrium no-arbitrage markets. Existing theories often assume a perfect complete market, but when pricing is linear, there is no diversification benefit from risk pooling and…
We formalize in the proof assistant Isabelle essential basic notions and results in financial mathematics. We provide generic formal definitions of concepts such as markets, portfolios, derivative products, arbitrages or fair prices, and we…
Classical asset pricing relies on the risk-neutral measure $Q$ for valuation, yet its economic interpretation is typically anchored in a physical measure $P$. This creates an inherent asymmetry: pricing is governed by $Q$, while meaning…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
Markets composed of stocks with capitalization processes represented by positive continuous semimartingales are studied under the condition that the market excess growth rate is bounded away from zero. The following examples of these…
Matching markets are of particular interest in computer science and economics literature as they are often used to model real-world phenomena where we aim to equitably distribute a limited amount of resources to multiple agents and…
We study graph products of groups from the viewpoint of measured group theory. We first establish a full measure equivalence classification of graph products of countably infinite groups over finite simple graphs with no transvection and no…
Families of exact solutions are found to a nonlinear modification of the Black-Scholes equation. This risk-adjusted pricing methodology model (RAPM) incorporates both transaction costs and the risk from a volatile portfolio. Using the Lie…
A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy.…
Quantum theory is used to model secondary financial markets. Contrary to stochastic descriptions, the formalism emphasizes the importance of trading in determining the value of a security. All possible realizations of investors holding…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…