Related papers: Endogenous Stochastic Arbitrage Bubbles and the Bl…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
We consider a constructive model for asset price bubbles, where the market price $W$ is endogenously determined by the trading activity on the market and the fundamental price $W^F$ is exogenously given, as in the work of Jarrow, Protter…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
The problem of hedging and pricing sequences of contingent claims in large financial markets is studied. Connection between asymptotic arbitrage and behavior of the $\alpha$~-~quantile price is shown. The large Black-Scholes model is…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…
Since the introduction of the Black-Scholes model stochastic processes have played an increasingly important role in mathematical finance. In many cases prices, volatility and other quantities can be modeled using stochastic ordinary…
The purpose of this work is to explore the role that random arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a…
We propose a simple model for the phenomenon of Eulerian spontaneous stochasticity in turbulence. This model is solved rigorously, proving that infinitesimal small-scale noise in otherwise a deterministic multi-scale system yields a…
The correlated stochastic volatility models constitute a natural extension of the Black and Scholes-Merton framework: here the volatility is not a constant, but a stochastic process correlated with the price log-return one. At present,…
The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
This note develops an arbitrage theory for a discrete-time market model without the assumption of the existence of a num\'eraire asset. Fundamental theorems of asset pricing are stated and proven in this context. The distinction between the…
In the Black-Scholes model, the absence of arbitrages imposes necessary constraints on the slope of the implied variance in terms of log-moneyness, asymptotically for large log-moneyness. The constraints are used for example in the SVI…
We consider a continuous-time financial market with an asset whose price is modeled by a linear stochastic differential equation with drift and volatility switching driven by a uniformly ergodic jump Markov process with a countable state…
In this work we study the averaging principle for non-autonomous slow-fast systems of stochastic differential equations. In particular in the first part we prove the averaging principle assuming the sublinearity, the Lipschitzianity and the…
Spontaneous stochasticity refers to the emergence of intrinsic randomness in deterministic systems under singular limits, a phenomenon conjectured to be fundamental in turbulence. Armstrong and Vicol recently constructed a deterministic,…
We consider multiscale stochastic dynamical systems. In this article an \emph{intermediate} reduced model is obtained for a slow-fast system with fast mode driven by white noise. First, the reduced stochastic system on exponentially…
We propose a novel Black-Scholes model under which the stock price processes are modeled by stochastic differential equations driven by sub-diffusions. The new framework can capture the less financial activity phenomenon during the bear…
We analyze and calculate the early exercise boundary for a class of stationary generalized Black-Scholes equations in which the volatility function depends on the second derivative of the option price itself. A motivation for studying the…
This paper considers adiabatic reduction in both discrete and continuous models of stochastic gene expression. In gene expression models, the concept of bursting is a production of several molecules simultaneously and is generally…