Related papers: Complete and competitive financial markets in a co…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal…
We test a historical price time series in a financial market (the NASDAQ 100 index) for a statistical property known as detailed balance. The presence of detailed balance would imply that the market can be modeled by a stochastic process…
In this paper, I consider a simple heterogeneous agents model of a production economy with uncertain climate change and examine constrained efficient carbon taxation. If there are frictionless, complete financial markets, the simple model…
We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
The paper develops a new class of financial market models. These models are based on generalized telegraph processes: Markov random flows with alternating velocities and jumps occurring when the velocities are switching. While such markets…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…
Recently, incomplete-market techniques have been used to develop a model applicable to credit default swaps (CDSs) with results obtained that are quite different from those obtained using the market-standard model. This article makes use of…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
We describe a way to complete a correlation matrix that is not fully specified. Such matrices often arise in financial applications when the number of stochastic variables becomes large or when several smaller models are combined in a…
We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a…
Many interesting problems in the Internet industry can be framed as a two-sided marketplace problem. Examples include search applications and recommender systems showing people, jobs, movies, products, restaurants, etc. Incorporating…
We introduce a formal framework for analyzing trades in financial markets. These days, all big exchanges use computer algorithms to match buy and sell requests and these algorithms must abide by certain regulatory guidelines. For example,…
A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy.…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by…
Financial exchange operators cater to the needs of their users while simultaneously ensuring compliance with the financial regulations. In this work, we focus on the operators' commitment for fair treatment of all competing participants. We…
We consider a large random network, in which the performance of a node depends upon that of its neighbours and some external random influence factors. This results in random vector valued fixed-point (FP) equations in large dimensional…
We consider the problem of optimal consumption of multiple goods in incomplete semimartingale markets. We formulate the dual problem and identify conditions that allow for existence and uniqueness of the solution and give a characterization…