Related papers: On decomposing risk in a financial-intermediate ma…
Assessing the contribution of various risk factors to future inflation risks was crucial for guiding monetary policy during the recent high inflation period. However, existing methodologies often provide limited insights by focusing solely…
Decentralized Finance (DeFi) money markets have seen explosive growth in recent years, with billions of dollars borrowed in various cryptocurrency assets. Key to the safety of money markets is the implementation of interest rates that…
The NA condition is one of the pillars supporting the classical theory of financial mathematics. We revisit this condition for financial market models where a dynamic risk-measure defined on $L^0$ is fixed to characterize the family of…
We prove that in smooth Markovian continuous-time economies with potentially complete asset markets, Radner equilibria with endogenously complete markets exist.
We consider a market model where there are two levels of information. The public information generated by the financial assets, and a larger flow of information that contains additional knowledge about a random time. This random time can…
This paper considers the problem faced by a bank which trades in the funds market so as to maintain the reserve requirements and minimize the costs of doing that. We work in a stochastic paradigm and the reserve requirements are determined…
We study the continuous time Kyle-Back model with a risk averse informed trader.We show that in a market with multiple assets and non-Gaussian prices an equilibrium exists. The equilibrium is constructed by considering a Fokker-Planck…
A fundamental question about a market is under what conditions, and then how rapidly, does price signaling cause price equilibration. Qualitatively, this ought to depend on how well-connected the market is. We address this question…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
Set-valued risk measures on $L^p_d$ with $0 \leq p \leq \infty$ for conical market models are defined, primal and dual representation results are given. The collection of initial endowments which allow to super-hedge a multivariate claim…
This paper studies optimal market making for large-tick assets in the presence of latency. We consider a random walk model for the asset price, and formulate the market maker's optimization problem using Markov Decision Processes (MDP). We…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
This paper studies the optimal timing to liquidate credit derivatives in a general intensity-based credit risk model under stochastic interest rate. We incorporate the potential price discrepancy between the market and investors, which is…
We propose a decentralized market model in which agents can negotiate bilateral contracts. This builds on a similar, but centralized, model of trading networks introduced by Hatfield et al. in 2013. Prior work has established that…
The emph{securities market} is the fundamental theoretical framework in economics and finance for resource allocation under uncertainty. Securities serve both to reallocate risk and to disseminate probabilistic information. emph{Complete}…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
We develop a new classification framework based on the theory of coherent risk measures and systemic risk. The proposed approach is suitable for multi-class problems when the data is noisy, scarce (relative to the dimension of the problem),…
We study the problem of determining risk-minimizing investment strategies for insurance payment processes in the presence of taxes and expenses. We consider the situation where taxes and expenses are paid continuously and symmetrically and…
We study decentralized markets with the presence of middlemen, modeled by a non-cooperative bargaining game in trading networks. Our goal is to investigate how the network structure of the market and the role of middlemen influence the…