Related papers: Arbitrage with bounded Liquidity
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
We propose a two-layer stochastic game model to study reinsurance contracting and competition in a market with one insurer and two competing reinsurers. The insurer negotiates with both reinsurers simultaneously for proportional reinsurance…
We establish deterministic necessary and sufficient conditions for the no-arbitrage notions NA ("no arbitrage"), NUPBR ("no unbounded profit with bounded risk") and NFLVR ("no free lunch with vanishing risk") in general diffusion market…
Computing market equilibria is an important practical problem for market design, for example in fair division of items. However, computing equilibria requires large amounts of information (typically the valuation of every buyer for every…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial…
Consider a market of competing model providers selling query access to models with varying costs and capabilities. Customers submit problem instances and are willing to pay up to a budget for a verifiable solution. An arbitrageur…
The problem of allocating scarce items to individuals is an important practical question in market design. An increasingly popular set of mechanisms for this task uses the concept of market equilibrium: individuals report their preferences,…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
We are interested in the existence of equivalent martingale measures and the detection of arbitrage opportunities in markets where several multi-asset derivatives are traded simultaneously. More specifically, we consider a financial market…
Polymarket is a prediction market platform where users can speculate on future events by trading shares tied to specific outcomes, known as conditions. Each market is associated with a set of one or more such conditions. To ensure proper…
We consider Geometric Mean Market Makers -- a special type of Decentralized Exchange -- with two types of users: liquidity takers and arbitrageurs. Liquidity takers trade at prices that can create arbitrage opportunities, while arbitrageurs…
Bilateral trade models the task of intermediating between two strategic agents, a seller and a buyer, willing to trade a good for which they hold private valuations. We study this problem from the perspective of a broker, in a regret…
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…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
In this short note we show how virtual arbitrage opportunities can be modelled and included in the standard derivative pricing without changing the general framework.
We consider an infinite dimensional optimization problem motivated by mathematical economics. Within the celebrated "Arbitrage Pricing Model", we use probabilistic and functional analytic techniques to show the existence of optimal…