Related papers: Open Markets and Hybrid Jacobi Processes
We define the concept of an `open' Markov process, a continuous-time Markov chain equipped with specified boundary states through which probability can flow in and out of the system. External couplings which fix the probabilities of…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
In this article, we analyse optimal statistical arbitrage strategies from stochastic control and optimisation problems for multiple co-integrated stocks with eigenportfolios being factors. Optimal portfolio weights are found by solving a…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
We study Atlas-type models of equity markets with local characteristics that depend on both name and rank, and in ways that induce a stable capital distribution. Ergodic properties and rankings of processes are examined with reference to…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…
We construct a thin double category HS (Hub-and-Spoke) whose objects are closed subsets of standard simplices, horizontal morphisms are continuous maps representing portfolio re-implementation processes, and vertical morphisms are closed…
A simple and elegant arrangement of stock components of a portfolio (market index-DJIA) in a recent paper [1], has led to the construction of crossing of stocks diagram. The crossing stocks method revealed hidden remarkable algebraic and…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
Two kinetic exchange models are proposed to explore the dynamics of closed economic markets characterized by random exchanges, saving propensities, and collective transactions. Model I simulates a system where individual transactions occur…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
We study an optimal portfolio problem designed for an agent operating in intraday electricity markets. The investor is allowed to trade in a single risky asset modelling the continuously traded power and aims to maximize the expected…
We consider a financial market in which two securities are traded: a stock and an index. Their prices are assumed to satisfy the Black-Scholes model. Besides assuming that the index is a tradable security, we also assume that it is…
We prove a general duality result for multi-stage portfolio optimization problems in markets with proportional transaction costs. The financial market is described by Kabanov's model of foreign exchange markets over a finite probability…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…