Related papers: Complete and competitive financial markets in a co…
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…
We explore the possibility of designing matching mechanisms that can accommodate non-standard choice behavior. We pin down the necessary and sufficient conditions on participants' choice behavior for the existence of stable and incentive…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies…
We consider the problem of optimal consumption from labor income and investment in a general incomplete semimartingale market. The economic agent cannot borrow against future income, so the total wealth is required to be positive at (all or…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…
We consider a prediction market in which all aspects are controlled by market forces, in particular the correct outcomes of events are decided by the market itself rather than by trusted arbiters. This kind of a decentralized prediction…
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
I shall describe a general model-theoretic task to construct expansions of pseudofinite structures and discuss several examples of particular relevance to computational complexity. Then I will present one specific situation where finding a…
Since Choo and Siow (2006), a burgeoning literature has analyzed matching markets when utility is perfectly transferable and the joint surplus is separable. We take stock of recent methodological developments in this area. Combining…
We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and…
Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has…
Forward-looking correlations are of interest in different financial applications, including factor-based asset pricing, forecasting stock-price movements or pricing index options. With a focus on non-FX markets, this paper defines necessary…
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 provide easily verifiable conditions for the well-posedness of the optimal investment problem for a behavioral investor in an incomplete discrete-time multiperiod financial market model, for the first time in the literature. Under two…
This paper develops a theory of competitive equilibrium with indivisible goods based entirely on economic conditions on demand. The key idea is to analyze complementarity and substitutability between bundles of goods, rather than merely…
We consider idealized financial markets in which price paths of the traded securities are cadlag functions, imposing mild restrictions on the allowed size of jumps. We prove the existence of quadratic variation for typical price paths,…