Related papers: Complete and competitive financial markets in a co…
We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically…
This paper gives yet another definition of game-theoretic probability in the context of continuous-time idealized financial markets. Without making any probabilistic assumptions (but assuming positive and continuous price paths), we obtain…
We consider an optimal investment problem to maximize expected utility of the terminal wealth, in an illiquid market with search frictions and transaction costs. In the market model, an investor's attempt of transaction is successful only…
The recent financial crisis has sharply revealed that current understanding of the global financial system is more than limited. In the recovery plan the confidence in the underlying theory is crucial. To address the problem we propose the…
We maximize the expected utility of terminal wealth in an incomplete market where there are cone constraints on the investor's portfolio process and the utility function is not assumed to be strictly concave or differentiable. We establish…
In this paper, we prove the global risk optimality of the hedging strategy of contingent claim, which is explicitly (or called semi-explicitly) constructed for an incomplete financial market with external risk factors of non-Gaussian…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…
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…
Developing a system of indicators that reflects the degree to which the securities market fulfils its key functions, is essential to assess the level of its development. In the conditions of asymmetric information it can also provide…
Incomplete financial markets are considered, defined by a multi-dimensional non-homogeneous diffusion process, being the direct sum of an It\^{o} process (the price process), and another non-homogeneous diffusion process (the exogenous…
Many complex systems satisfy a set of constraints on their degrees of freedom, and at the same time, they are able to work and adapt to different conditions. Here, we describe the emergence of this ability in a simplified model in which the…
The paper studies the concepts of hedging and arbitrage in a non probabilistic framework. It provides conditions for non probabilistic arbitrage based on the topological structure of the trajectory space and makes connections with the usual…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
The field of Financial Networks is a paramount example of the novel applications of Statistical Physics that have made possible by the present data revolution. As the total value of the global financial market has vastly outgrown the value…
Competitive balance in a football league is extremely important from the perspective of economic growth of the industry. Many researchers have earlier proposed different measures of competitive balance, which are primarily adapted from the…
Electricity markets differ in their ability to meet power imbalances in short notice in a controlled fashion. Relatively flexible markets have the ability to ramp up (or down) power flows across interties without compromising their ability…
This is a review about financial dependencies which merges efforts in econophysics and financial economics during the last few years. We focus on the most relevant contributions to the analysis of asset markets' dependencies, especially…
The modeling of complex systems such as ecological or socio-economic systems can be very challenging. Although various modeling approaches exist, they are generally not compatible and mutually consistent, and empirical data often do not…
A computational technique borrowed from the physical sciences is introduced to obtain accurate closed-form approximations for the transition probability of arbitrary diffusion processes. Within the path integral framework the same technique…