Related papers: Non-unique time and market incompleteness
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
The money market and the capital market of the Indian financial markets have a symbiotic relationship in the development of the Indian economy. The nature and the characteristics of the markets differ to a large extent as the money market…
We study time-consistency questions for processes of monetary risk measures that depend on bounded discrete-time processes describing the evolution of financial values. The time horizon can be finite or infinite. We call a process of…
This paper is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, e.g., a long-distance market and an…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…
We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are…
Prices of commodities or assets produce what is called time-series. Different kinds of financial time-series have been recorded and studied for decades. Nowadays, all transactions on a financial market are recorded, leading to a huge amount…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…
In this paper we study coupled fully non-local equations, where a linear non-local operator jointly acts on the time and space variables. We establish existence and uniqueness of the solution. A maximum principle is proved and used to…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
These notes discuss several topics in neoclassical economics and alternatives, with an aim of reviewing fundamental issues in modeling economic markets. I start with a brief, non-rigorous summary of the basic Arrow-Debreu model of general…
We present an empirical analysis of the microstructure of financial markets and, in particular, of the static and dynamic properties of liquidity. We find that on relatively large time scales (15 minutes) large price fluctuations are…
Online marketplaces increasingly do more than simply match buyers and sellers: they route orders across competing sellers and, in many categories, offer ancillary fulfillment services that make seller inventory a source of platform revenue.…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
This work builds upon the long-standing conjecture that linear diffusion models are inadequate for complex market dynamics. Specifically, it provides experimental validation for the author's prior arguments that realistic market dynamics…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…