scholarly journals THE EXISTENCE OF EQUILIBRIUM IN A FINANCIAL MARKET WITH TRANSACTION COSTS

1999 ◽  
pp. 323-343 ◽  
Author(s):  
XING JIN ◽  
FRANK MILNE
Keyword(s):  
Transaction Costs ◽  
Financial Market ◽  
Existence Of Equilibrium

MINIMIZING THE PROBABILITY OF LIFETIME RUIN: TWO RISKLESS ASSETS WITH TRANSACTION COSTS

2019 ◽  
Vol 49 (03) ◽  
pp. 847-883
Author(s):  
Xiaoqing Liang ◽  
Virginia R. Young
Keyword(s):  
Transaction Costs ◽  
Financial Market ◽  
Optimal Investment ◽  
Investment Strategy ◽  
Money Market ◽  
The Other ◽  
Proportional Transaction Costs ◽  
Optimal Investment Strategy ◽  
The Individual ◽  
Riskless Asset

AbstractWe compute the optimal investment strategy for an individual who wishes to minimize her probability of lifetime ruin. The financial market in which she invests consists of two riskless assets. One riskless asset is a money market, and she consumes from that account. The other riskless asset is a bond that earns a higher interest rate than the money market, but buying and selling bonds are subject to proportional transaction costs. We consider the following three cases. (1) The individual is allowed to borrow from both riskless assets; ruin occurs if total imputed wealth reaches zero. Under the optimal strategy, the individual does not sell short the bond. However, she might wish to borrow from the money market to fund her consumption. Thus, in the next two cases, we seek to limit borrowing from that account. (2) We assume that the individual pays a higher rate to borrow than she earns on the money market. (3) The individual is not allowed to borrow from either asset; ruin occurs if both the money market and bond accounts reach zero wealth. We prove that the borrowing rate in case (2) acts as a parameter connecting the two seemingly unrelated cases (1) and (3).

scholarly journals TRANSACTION COSTS INFLUENCE ON THE STABILITY OF FINANCIAL MARKET: AGENT-BASED SIMULATION

2013 ◽  
Vol 14 (Supplement_1) ◽  
pp. S1-S12 ◽  
Author(s):  
Roman Šperka ◽  
Marek Spišák
Keyword(s):  
Transaction Costs ◽  
Financial Market ◽  
Positive Impact ◽  
State Theory ◽  
Market Model ◽  
Agent Based Simulation ◽  
Trading Rules ◽  
Agent Based ◽  
Market Stability ◽  
Financial Market Stability

We implement an agent-based simulation of financial market model. Agent-based simulations are used nowadays as an alternative to the traditional models, based on predetermined equilibrium state theory. Agent technology brings some kind of local intelligence and rational expectations to the decision support system of financial market participants. Agents follow technical and fundamental trading rules to determine their speculative investment positions. We consider direct interactions between speculators and they may decide to change their trading behaviour. If a technical trader meets a fundamental trader and they realize that fundamental trading has been more profitable than technical trading in recent past, the probability that the technical trader switches to the fundamental trading rules is relatively high. In particular the influence of transaction costs is studied in this paper. Transaction costs can be increased by the off-market regulation (for example in the form of taxes) on financial market stability, by overall volume of trade and other market characteristics. The paper shows a positive impact of suitable transaction costs on the financial market stability in the long run.

scholarly journals Geometric No-Arbitrage Analysis in the Dynamic Financial Market with Transaction Costs

2019 ◽  
Vol 12 (1) ◽  
pp. 26
Author(s):  
Wanxiao Tang ◽  
Jun Zhao ◽  
Peibiao Zhao
Keyword(s):  
Transaction Costs ◽  
Financial Market ◽  
Expected Utility ◽  
Maximization Problem ◽  
No Arbitrage ◽  
The One

The present paper considers a class of financial market with transaction costs and constructs a geometric no-arbitrage analysis frame. Then, this paper arrives at the fact that this financial market is of no-arbitrage if and only if the curvature 2-form of a specific connection is zero. Furthermore, this paper derives the fact that the no-arbitrage condition for the one-period financial market is equivalent to the geometric no-arbitrage condition. Finally, an example states the equivalence between the geometric no-arbitrage condition and the existence of the solutions for a maximization problem of expected utility.

scholarly journals On the existence of sure profits via flash strategies

2019 ◽  
Vol 56 (2) ◽  
pp. 384-397 ◽  
Author(s):  
Claudio Fontana ◽  
Markus Pelger ◽  
Eckhard Platen
Keyword(s):  
General Theory ◽  
Transaction Costs ◽  
Financial Market ◽  
High Frequency ◽  
Asset Prices ◽  
General Setting ◽  
Trading Strategies ◽  
Frequency Limit ◽  
Price Process ◽  
High Frequency Limit

AbstractWe introduce and study the notion of sure profits via flash strategies, consisting of a high-frequency limit of buy-and-hold trading strategies. In a fully general setting, without imposing any semimartingale restriction, we prove that there are no sure profits via flash strategies if and only if asset prices do not exhibit predictable jumps. This result relies on the general theory of processes and provides the most general formulation of the well-known fact that, in an arbitrage-free financial market, asset prices (including dividends) should not exhibit jumps of a predictable direction or magnitude at predictable times. We furthermore show that any price process is always right-continuous in the absence of sure profits. Our results are robust under small transaction costs and imply that, under minimal assumptions, price changes occurring at scheduled dates should only be due to unanticipated information releases.

scholarly journals On the quasi-sure superhedging duality with frictions

2019 ◽  
Vol 24 (1) ◽  
pp. 249-275
Author(s):  
Erhan Bayraktar ◽  
Matteo Burzoni
Keyword(s):  
Transaction Costs ◽  
Financial Market ◽  
Discrete Time ◽  
Natural Condition ◽  
Model Uncertainty ◽  
Original Model ◽  
Restrictive Assumption ◽  
Proportional Transaction Costs ◽  
No Arbitrage ◽  
Portfolio Constraints

AbstractWe prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modelled through solvency cones as in the original model of Kabanov (Finance Stoch. 3:237–248, 1999) adapted to the quasi-sure setup of Bouchard and Nutz (Ann. Appl. Probab. 25:823–859, 2015). Our approach allows removing the restrictive assumption of no arbitrage of the second kind considered in Bouchard et al. (Math. Finance 29:837–860, 2019) and showing the duality under the more natural condition of strict no arbitrage. In addition, we extend the results to models with portfolio constraints.

Sign in / Sign up

Export Citation Format

Share Document