Related papers: Characterization of arbitrage-free markets

In this paper we study a family of nonlinear (conditional) expectations that can be understood as a continuous semimartingale with uncertain local characteristics. Here, the differential characteristics are prescribed by a set-valued…

We extend the Bipolar Theorem of Brannath and Schachermayer (1999) to the space of nonnegative cadlag supermartingales on a filtered probability space. We formulate the notion of fork-convexity as an analogue to convexity in this setting.…

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…

We fully characterize the absence of Butterfly arbitrage in the SVI formula for implied total variance proposed by Gatheral in 2004. The main ingredient is an intermediary characterization of the necessary condition for no arbitrage…

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…

The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…

We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure $\rho$. We first show that under mild assumptions, the set of optimal portfolios for a fixed return…

We investigate the links between various no-arbitrage conditions and the existence of pricing functionals in general markets, and prove the Fundamental Theorem of Asset Pricing therein. No-arbitrage conditions, either in this abstract…

In a two-period financial market where a stock is traded dynamically and European options at maturity are traded statically, we study the so-called martingale Schr\"odinger bridge Q*; that is, the minimal-entropy martingale measure among…

We introduce a method for proving almost sure termination in the context of lambda calculus with continuous random sampling and explicit recursion, based on ranking supermartingales. This result is extended in three ways. Antitone ranking…

In Karatzas and Kardaras's paper on semimartingale financial models, it is proved that the NUPBR condition is a property of the local characteristic of the asset process alone. In Takaoka's paper on NUPBR, it is proved that the NUPBR…

In the paper, we introduce the notion of a local regular supermartingale relative to a convex set of equivalent measures and prove for it the necessary and sufficient conditions of optional Doob decomposition in the discrete case. This…

We establish a rigorous duality theory, under No Unbounded Profit with Bounded Risk, for an infinite horizon problem of optimal consumption in the presence of an income stream that can terminate randomly at an exponentially distributed…

The concept of finitely additive supermartingales, originally due to Bochner, is revived and developed. We exploit it to study measure decompositions over filtered probability spaces and the properties of the associated Dol\'{e}ans-Dade…

Based on a criterion of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…

In a discrete-time financial market, a generalized duality is established for model-free superhedging, given marginal distributions of the underlying asset. Contrary to prior studies, we do not require contingent claims to be upper…

We discuss martingales, detrending data, and the efficient market hypothesis for stochastic processes x(t) with arbitrary diffusion coefficients D(x,t). Beginning with x-independent drift coefficients R(t) we show that Martingale stochastic…

From the perspective of expectations of randomly stopped sums, Wald's equation and the Optional Sampling Theorem identify situations in which the stopping time can be decoupled from the stopping place, acting as if the two were independent.…

This paper studies the loss of the semimartingale property of the process $g(Y)$ at the time a one-dimensional diffusion $Y$ hits a level, where $g$ is a difference of two convex functions. We show that the process $g(Y)$ can fail to be a…

In a discrete-time market, we study model-independent superhedging, while the semi-static superhedging portfolio consists of {\it three} parts: static positions in liquidly traded vanilla calls, static positions in other tradable, yet…