Related papers: Arbitrage risk induced by transaction costs
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…
The goal of this paper is to study the effect of entanglement on the running time of a quantum computation. Adiabatic quantum computation is suited to this kind of study, since it allows us to explicitly calculate the time evolution of the…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
Recent development in quantum computation and quantum information theory allows to extend the scope of game theory for the quantum world. The paper is devoted to the analysis of interference of quantum strategies in quantum market games.
A paradigmatic algorithm for online learning is the Hedge algorithm by Freund and Schapire. An allocation into different strategies is chosen for multiple rounds and each round incurs corresponding losses for each strategy. The algorithm…
In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
We consider the classical problem of building an arbitrage-free implied volatility surface from bid-ask quotes. We design a fast numerical procedure, for which we prove the convergence, based on the Sinkhorn algorithm that has been recently…
In the present article we use the quantum formalism to describe the effects of risk and ambiguity in decision theory. The main idea is that the probabilities in the classic theory of expected utility are estimated probabilities, and thus do…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
Consider a discrete-time infinite horizon financial market model in which the logarithm of the stock price is a time discretization of a stochastic differential equation. Under conditions different from those given in a previous paper of…
In the context of a general semimartingale model of a complete market, we aim at answering the following question: How much is an investor willing to pay for learning some inside information that allows to achieve arbitrage? If such a value…
Notions of circuit complexity and cost play a key role in quantum computing and simulation where they capture the (weighted) minimal number of gates that is required to implement a unitary. Similar notions also become increasingly prominent…
Integer variables allow the treatment of some portfolio optimization problems in a more realistic way and introduce the possibility of adding some natural features to the model. We propose an algebraic approach to maximize the expected…
In order to use the advanced inference techniques available for Ising models, we transform complex data (real vectors) into binary strings, by local averaging and thresholding. This transformation introduces parameters, which must be varied…
We present a static framework for analysing quantum routing protocols that we call the \textit{cost-vector formalism}. Here, quantum networks are recast as multi-graphs where edges represent two-qubit entanglement resources that…
We present a quantum algorithm for portfolio optimization. We discuss the market data input, the processing of such data via quantum operations, and the output of financially relevant results. Given quantum access to the historical record…