Related papers: Triangular arbitrage as an interaction among forei…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
Triangle fees are a novel fee structure for AMMs, in which marginal fees are decreasing in a trade's size. That decline is proportional to the movement in the AMM's implied price, i.e. for every basis point the trade moves the ratio of…
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…
Arbitrage can arise from the simultaneous purchase and sale of the same asset in different markets in order to profit from a difference in its price. This work systematically reviews arbitrage opportunities between Automated Market Makers…
We introduce here for the first time the long-term swap rate, characterised as the fair rate of an overnight indexed swap with infinitely many exchanges. Furthermore we analyse the relationship between the long-term swap rate, the long-term…
We applied the SVAR-LiNGAM to illustrate the causal relationships between the spot exchange rate, and three crypto-asset exchange rates, Bitcoin, Ethereum, and Ripple. It was notable that the causal order, the EUR_USD spot…
We study how trading costs are reflected in equilibrium returns. To this end, we develop a tractable continuous-time risk-sharing model, where heterogeneous mean-variance investors trade subject to a quadratic transaction cost. The…
We generalize the Arbitrage Pricing Theory (APT) to include the contribution of virtual arbitrage opportunities. We model the arbitrage return by a stochastic process. The latter is incorporated in the APT framework to calculate the…
We study bilateral trade with interdependent values as an informed-principal problem. The mechanism-selection game has multiple equilibria that differ with respect to principal's payoff and trading surplus. We characterize the equilibrium…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a framework to jointly identify similar assets through factors, identify mispricing and form a trading policy that maximizes risk-adjusted…
In this paper we study empirically the Forward Rate Curve (FRC) of 5 different currencies. We confirm and extend the findings of our previous investigation of the U.S. Forward Rate Curve. In particular, the average FRC follows a square-root…
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 dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other…
The Foreign Exchange (Forex) is a large decentralized market, on which trading analysis and algorithmic trading are popular. Research efforts have been focusing on proof of efficiency of certain technical indicators. We demonstrate,…
In FX cash markets, market makers provide liquidity to clients for a wide variety of currency pairs. Because of flow uncertainty and market volatility, they face inventory risk. To mitigate this risk, they typically skew their prices to…
The increasing use of cryptoassets for international remittances has proven to be faster and more cost-effective, particularly for migrants without access to traditional banking. However, the inherent volatility of cryptoasset prices,…
In recent years, the popularity of artificial intelligence has surged due to its widespread application in various fields. The financial sector has harnessed its advantages for multiple purposes, including the development of automated…
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula…
We describe a new model to simulate the dynamic interactions between market price and the decisions of two different kind of traders. They possess spatial mobility allowing to group together to form coalitions. Each coalition follows a…
The \$-Game was recently introduced as an extension of the Minority Game. In this paper we compare this model with the well know Minority Game and the Majority Game models. Due to the inter-temporal nature of the market payoff, we introduce…