Related papers: A Relation between Short-Term and Long-Term Arbitr…
Managing investment portfolios is an old and well know problem in multiple fields including financial mathematics and financial engineering as well as econometrics and econophysics. Multiple different concepts and theories were used so far…
This paper analyzes and explicitly solves a class of long-term average impulse control problems with a specific mean-field interaction. The underlying process is a general one-dimensional diffusion with appropriate boundary behavior. The…
We employ perturbation analysis technique to study multi-asset portfolio optimisation with transaction cost. We allow for correlations in risky assets and obtain optimal trading methods for general utility functions. Our analytical results…
This paper considers the mean-reverting portfolio design problem arising from statistical arbitrage in the financial markets. We first propose a general problem formulation aimed at finding a portfolio of underlying component assets by…
We discuss final-offer arbitration where two quantitative issues are in dispute and model it as a zero-sum game. Under reasonable assumptions we both derive a pure strategy pair and show that it is both a local equilibrium and furthermore…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
The article presents calculations that prove practical importance of the earlier derived theoretical relationship between the interest rate on the interbank credit market, volume of investment and the quantity of securities tradable on the…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
Assuming frictionless trading, classical stochastic portfolio theory (SPT) provides relative arbitrage strategies. However, the costs associated with real-world execution are state-dependent, volatile, and under increasing stress during…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
This paper proposes two approaches that quantify the exact relationship among the viability, the absence of arbitrage, and/or the existence of the num\'eraire portfolio under minimal assumptions and for general continuous-time market…
This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
Using high frequency data, we have studied empirically the change of volatility, also called volatility derivative, for various time horizons. In particular, the correlation between the volatility derivative and the volatility realized in…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
Even when confronted with the same data, agents often disagree on a model of the real-world. Here, we address the question of how interacting heterogenous agents, who disagree on what model the real-world follows, optimize their trading…
Empirical researchers and decision-makers spanning various domains frequently seek profound insights into the long-term impacts of interventions. While the significance of long-term outcomes is undeniable, an overemphasis on them may…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…