Related papers: Instantaneous Arbitrage and the CAPM
In the context of a general continuous financial market model, we study whether the additional information associated with an honest time gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations,…
Humans and animals have the ability to reason and make predictions about different courses of action at many time scales. In reinforcement learning, option models (Sutton, Precup \& Singh, 1999; Precup, 2000) provide the framework for this…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We study superhedging of contingent claims with physical delivery in a discrete-time market model with convex transaction costs. Our model extends Kabanov's currency market model by allowing for nonlinear illiquidity effects. We show that…
In this article we study an optimal stopping/optimal control problem which models the decision facing a risk-averse agent over when to sell an asset. The market is incomplete so that the asset exposure cannot be hedged. In addition to the…
We consider the classical problem of building an arbitrage-free implied volatility surface from bid-ask quotes. We design a fast numerical procedure, for which we prove the convergence, based on the Sinkhorn algorithm that has been recently…
We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure $\rho$. We first show that under mild assumptions, the set of optimal portfolios for a fixed return…
Statistical arbitrage is a class of financial trading strategies using mean reversion models. The corresponding techniques rely on a number of assumptions which may not hold for general non-stationary stochastic processes. This paper…
The Bethe-Salpeter equation for bound states of a fermion-antifermion pair in the instantaneous approximation for the involved interaction kernel is converted into an equivalent matrix eigenvalue problem with explicitly (algebraically)…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
Within the well-known framework of financial portfolio optimization, we analyze the existing relationships between the condition of arbitrage and the utility maximization in presence of \emph{insider information}. We assume that, since the…
In this paper, we consider the discrete-time setting, and the market model described by (S,F,T)$. Herein F is the ``public" flow of information which is available to all agents overtime, S is the discounted price process of d-tradable…
We extend AMM trade functions to negative inputs via the \textit{concave continuation}, derived from the invariance of the local conservation law under allocation direction flips. This unifies routing and arbitrage into a single problem. We…
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions…
This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we find that arbitrage operations when four currencies are present may appear…
The Capital Asset Pricing Model (CAPM) is one of the original models in explaining risk-return relationship in the financial market. However, when applying the CAPM into reality, it demonstrates a lot of shortcomings. While improving the…
We take ($\mu^\pm e^\mp$) systems and consider the states with quantum number $J^P=0^-$ as examples, to explore the different contents of the instantaneous Bethe-Salpeter (BS) equation and its analog, Breit equation, by solving them…
In the context of a general semimartingale model of a complete market, we aim at answering the following question: How much is an investor willing to pay for learning some inside information that allows to achieve arbitrage? If such a value…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
This paper analyzes repeated version of the bilateral trade model where the independent payoff relevant private information of the buyer and the seller is correlated across time. Using this setup it makes the following five contributions.…