Related papers: On general financial markets with concave transact…
We give characterizations of asymptotic arbitrage of the first and second kind and of strong asymptotic arbitrage for large financial markets with small proportional transaction costs $\la_n$ on market $n$ in terms of contiguity properties…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
The goal of this work is to study binary market models with transaction costs, and to characterize their arbitrage opportunities. It has been already shown that the absence of arbitrage is related to the existence of \lambda-consistent…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
The market impact (MI) of Volume Weighted Average Price (VWAP) orders is a convex function of a trading rate, but most empirical estimates of transaction cost are concave functions. How is this possible? We show that isochronic (constant…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
We study the arbitrage opportunities in the presence of transaction costs in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was constructed by Sottinen and named fractional binary…
This survey is an introduction to asymptotic methods for portfolio-choice problems with small transaction costs. We outline how to derive the corresponding dynamic programming equations and simplify them in the small-cost limit. This allows…
In this paper, we consider the problem of hedging Asian options in financial markets with transaction costs. For this, we use the asymptotic hedging approach. The main task of asymptotic hedging in financial markets with transaction costs…
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
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…
We study, from the perspective of large financial markets, the asymptotic arbitrage opportunities in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was introduced by Sottinen and…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…
We investigate the general structure of optimal investment and consumption with small proportional transaction costs. For a safe asset and a risky asset with general continuous dynamics, traded with random and time-varying but small…
In this paper we study the asymptotic behavior of a Boltzmann type price formation model, which describes the trading dynamics in a financial market. In many of these markets trading happens at high frequencies and low transactions costs.…
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…