Related papers: A Relation between Short-Term and Long-Term Arbitr…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We apply Geometric Arbitrage Theory to obtain results in mathematical finance for credit markets, which do not need stochastic differential geometry in their formulation. We obtain closed form equations involving default intensities and…
Consider a discrete-time infinite horizon financial market model in which the logarithm of the stock price is a time discretization of a stochastic differential equation. Under conditions different from those given in a previous paper of…
Most of parameters used to describe states and dynamics of financial market depend on proportions of the appropriate variables rather than on their actual values. Therefore, projective geometry seems to be the correct language to describe…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets. The target of the optimal MRP design…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
The recent work of Horikawa and Nakagawa (2024) claims that under a complete market admitting statistical arbitrage, the difference between the hedging position provided by deep hedging and that of the replicating portfolio is a statistical…
We construct and study market models admitting optimal arbitrage. We say that a model admits optimal arbitrage if it is possible, in a zero-interest rate setting, starting with an initial wealth of 1 and using only positive portfolios, to…
This paper examines the implementation of a statistical arbitrage trading strategy based on co-integration relationships where we discover candidate portfolios using multiple factors rather than just price data. The portfolio selection…
We are interested in the existence of equivalent martingale measures and the detection of arbitrage opportunities in markets where several multi-asset derivatives are traded simultaneously. More specifically, we consider a financial market…
Along with the energy transition, the energy markets change their organization toward more decentralized and self-organized structures, striving for locally optimal profits. These tendencies may endanger the physical grid stability. One…
Leveraged ETFs (L-ETFs) are exchange-traded funds that achieve price movements several times greater than an index by holding index-linked futures such as Nikkei Stock Average Index futures. It is known that when the price of an L-ETF…
Geometric Arbitrage Theory reformulates a generic asset model possibly allowing for arbitrage by packaging all assets and their forwards dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
In this short note, we will show how to optimize the portfolio of a large trader whose hedging strategy affects the price of his assets.