Related papers: A Relation between Short-Term and Long-Term Arbitr…
In this paper, we investigate a financial market model consisting of a risky asset, modeled as a general diffusion parameterized by a scale function and a speed measure, and a bank account process with a constant interest rate. This…
We develop a flexible stochastic approximation framework for analyzing the long-run behavior of learning in games (both continuous and finite). The proposed analysis template incorporates a wide array of popular learning algorithms,…
Asset correlations are an intuitive and therefore popular way to incorporate event dependence into event risk, e.g., default risk, modeling. In this paper we study the case of estimation of inter-sector asset correlations by separation of…
This is a work in progress. The aim is to propose a plausible mechanism for the short term dynamics of the oil market based on the interaction of economic agents. This is a theoretical research which by no means aim at describing all the…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
A geometric analysis of the time series of returns has been performed in the past and it implied that the most of the systematic information of the market is contained in a space of small dimension. Here we have explored subspaces of this…
Stochastic algorithms are among the best for solving computationally hard search and reasoning problems. The runtime of such procedures is characterized by a random variable. Different algorithms give rise to different probability…
What is the best market-neutral implementation of classical Equity Factors? Should one use the specific predictability of the short-leg to build a zero beta Long-Short portfolio, in spite of the specific costs associated to shorting, or is…
We consider an augmented version of Merton's portfolio choice problem, where trading by large investors influences the price of underlying financial asset leading to strategic interaction among investors, with investors deciding their…
This paper presents a dynamic game framework to analyze the role of large banks in interbank markets. By extending existing models, we incorporate a large bank as a dynamic decision-maker interacting with multiple small banks. Using the…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
I find a topological arrangement of stocks traded in a financial market which has associated a meaningful economic taxonomy. The topological space is a graph connecting the stocks of the portfolio analyzed. The graph is obtained starting…
We propose a definition of diversification as a binary relationship between financial portfolios. According to it, a convex linear combination of several risk positions with some weights is considered to be less risky than the probabilistic…
We study a mean-field version of rank-based models of equity markets such as the Atlas model introduced by Fernholz in the framework of Stochastic Portfolio Theory. We obtain an asymptotic description of the market when the number of…
A brief review is given of the minority game, an idealized model of a market of speculative agents, and its complex many-body behaviour. Particular consideration is given to the consequences and implications of correlations between…
We study the problem of prediction with expert advice with adversarial corruption where the adversary can at most corrupt one expert. Using tools from viscosity theory, we characterize the long-time behavior of the value function of the…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
The interactions between a large population of high-frequency traders (HFTs) and a large trader (LT) who executes a certain amount of assets at discrete time points are studied. HFTs are faster in the sense that they trade continuously and…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…