Related papers: Complete and competitive financial markets in a co…
This paper investigates the optimal choices of financial derivatives to complete a financial market in the framework of stochastic volatility (SV) models. We introduce an efficient and accurate simulation-based method, applicable to…
In this paper we aim to study viability and completeness in finite markets. In order to do that, we characterize the set of equivalent martingale measures of two-period markets as convex combinations of a finite number of martingale…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
The completeness of a bond market model with infinite number of sources of randomness on a finite time interval in the Heath-Jarrow-Morton framework is studied. It is proved that the market is not complete. A construction of a bounded…
This article presents methods for estimating extreme probabilities, beyond the range of the observations. These methods are model-free and applicable to almost any sample size. They are grounded in order statistics theory and have a wide…
We propose a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
We consider an investor who, while maximizing his/her expected utility, also compares the outcome to a reference entity. We recall the notion of personal equilibrium and show that, in a multistep, generically incomplete financial market…
Economic models may exhibit incompleteness depending on whether or not they admit certain policy-relevant features such as strategic interaction, self-selection, or state dependence. We develop a novel test of model incompleteness and…
We study markets with no riskless (safe) asset. We derive the corresponding Black-Scholes-Merton option pricing equations for markets where there are only risky assets which have the following price dynamics: (i) continuous diffusions; (ii)…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
This paper discusses serious drawbacks of existing knowledge in macroeconomics and finance in explaining and predicting economic and financial phenomena. Complexity science is proposed as an alternative approach to be used in order to…
We formulate conditions for the solvability of the problem of robust utility maximization from final wealth in continuous time financial markets, without assuming weak compactness of the densities of the uncertainty set, as customary in the…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
We survey systemic risks to financial markets and present a high-level description of an algorithm that measures systemic risk in terms of coupled networks.