scholarly journals GOOD DEAL BOUNDS WITH CONVEX CONSTRAINTS

2017 ◽  
Vol 20 (02) ◽  
pp. 1750011
Author(s):  
TAKUJI ARAI
Keyword(s):  
Asset Pricing ◽  
Financial Market ◽  
Risk Measure ◽  
Good Deal ◽  
Upper And Lower Bounds ◽  
Convex Constraints ◽  
Market Models ◽  
Convex Risk Measure ◽  
No Arbitrage ◽  
Constrained Markets

We investigate the structure of good deal bounds, which are subintervals of a no-arbitrage pricing bound, for financial market models with convex constraints as an extension of Arai & Fukasawa (2014). The upper and lower bounds of a good deal bound are naturally described by a convex risk measure. We call such a risk measure a good deal valuation; and study its properties. We also discuss superhedging cost and Fundamental Theorem of Asset Pricing for convex constrained markets.

scholarly journals No-arbitrage concepts in topological vector lattices

Positivity ◽  
2021 ◽  
Author(s):  
Eckhard Platen ◽  
Stefan Tappe
Keyword(s):  
Asset Pricing ◽  
Financial Market ◽  
General Framework ◽  
General Setting ◽  
Structural Condition ◽  
Trading Strategies ◽  
Banach Function Spaces ◽  
No Arbitrage ◽  
Vector Lattices ◽  
Initial Wealth

AbstractWe provide a general framework for no-arbitrage concepts in topological vector lattices, which covers many of the well-known no-arbitrage concepts as particular cases. The main structural condition we impose is that the outcomes of trading strategies with initial wealth zero and those with positive initial wealth have the structure of a convex cone. As one consequence of our approach, the concepts NUPBR, NAA$$_1$$ 1 and NA$$_1$$ 1 may fail to be equivalent in our general setting. Furthermore, we derive abstract versions of the fundamental theorem of asset pricing (FTAP), including an abstract FTAP on Banach function spaces, and investigate when the FTAP is warranted in its classical form with a separating measure. We also consider a financial market with semimartingales which does not need to have a numéraire, and derive results which show the links between the no-arbitrage concepts by only using the theory of topological vector lattices and well-known results from stochastic analysis in a sequence of short proofs.

scholarly journals Option Pricing Driven by a Telegraph Process with Random Jumps

2012 ◽  
Vol 49 (3) ◽  
pp. 838-849 ◽  
Author(s):  
Oscar López ◽  
Nikita Ratanov
Keyword(s):  
Option Pricing ◽  
Financial Market ◽  
Option Prices ◽  
Martingale Measures ◽  
Market Models ◽  
Telegraph Process ◽  
Equivalent Martingale Measures ◽  
Hedging Strategies ◽  
Random Jumps ◽  
Equivalent Martingale

In this paper we propose a class of financial market models which are based on telegraph processes with alternating tendencies and jumps. It is assumed that the jumps have random sizes and that they occur when the tendencies are switching. These models are typically incomplete, but the set of equivalent martingale measures can be described in detail. We provide additional suggestions which permit arbitrage-free option prices as well as hedging strategies to be obtained.

scholarly journals On The Fundamental Theorem Of Asset Pricing: Random Constraints And Bang-Bang No-Arbitrage Criteria

2004 ◽  
Vol 14 (2) ◽  
pp. 201-221 ◽  
Author(s):  
Igor V. Evstigneev ◽  
Klaus Schurger ◽  
Michael I. Taksar
Keyword(s):  
Asset Pricing ◽  
Fundamental Theorem ◽  
No Arbitrage

scholarly journals Dating Capital Market Integration In The EMU

2011 ◽  
Vol 10 (3) ◽  
pp. 63
Author(s):  
Sergiy Rakhmayil
Keyword(s):  
Asset Pricing ◽  
Financial Market ◽  
Capital Market ◽  
Market Integration ◽  
Structural Breaks ◽  
Capital Market Integration ◽  
Market Variables

This paper analyzes the effect of the Euro on structural breaks in financial market variables in a sample of three EMU (France, Germany, Netherlands) and two non-EMU (U.K. and Switzerland) countries from March 1984 to November 2002. We identify two dates when integration-related structural breaks occurred in European asset pricing; the first in 1986 affected all sample countries whereas the second in 2000 affected only the EMU countries and could be attributed to the adoption of Euro in 1999.

Financial market models with global interactions

2003 ◽  
pp. 81-136
Author(s):  
NEIL F. JOHNSON ◽  
PAUL JEFFERIES ◽  
PAK MING HUI
Keyword(s):  
Financial Market ◽  
Market Models

Analyzing the Influences of Passive Investment Strategies on Financial Markets via Agent-Based Modeling

2008 ◽  
pp. 224-238 ◽  
Author(s):  
Hiroshi Takahashi ◽  
Satoru Takahashi ◽  
Takao Terano
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Financial Market ◽  
Investment Strategy ◽  
Agent Based Modeling ◽  
Investment Strategies ◽  
Agent Based Model ◽  
Efficient Market ◽  
Agent Based ◽  
Price Fluctuations

This chapter develops an agent-based model to analyze microscopic and macroscopic links between investor behaviors and price fluctuations in a financial market. This analysis focuses on the effects of Passive Investment Strategy in a financial market. From the extensive analyses, we have found that (1) Passive Investment Strategy is valid in a realistic efficient market, however, it could have bad influences such as instability of market and inadequate asset pricing deviations, and (2) under certain assumptions, Passive Investment Strategy and Active Investment Strategy could coexist in a Financial Market.

scholarly journals Mean-Variance Hedging Based on an Incomplete Market with External Risk Factors of Non-Gaussian OU Processes

2015 ◽  
Vol 2015 ◽  
pp. 1-20
Author(s):  
Wanyang Dai
Keyword(s):  
Risk Factors ◽  
Financial Market ◽  
Contingent Claim ◽  
Global Risk ◽  
Hedging Strategy ◽  
Put Options ◽  
No Arbitrage ◽  
Special Cases ◽  
External Risk ◽  
Non Gaussian

We prove the global risk optimality of the hedging strategy of contingent claim, which is explicitly (or called semiexplicitly) constructed for an incomplete financial market with external risk factors of non-Gaussian Ornstein-Uhlenbeck (NGOU) processes. Analytical and numerical examples are both presented to illustrate the effectiveness of our optimal strategy. Our study establishes the connection between our financial system and existing general semimartingale based discussions by justifying required conditions. More precisely, there are three steps involved. First, we firmly prove the no-arbitrage condition to be true for our financial market, which is used as an assumption in existing discussions. In doing so, we explicitly construct the square-integrable density process of the variance-optimal martingale measure (VOMM). Second, we derive a backward stochastic differential equation (BSDE) with jumps for the mean-value process of a given contingent claim. The unique existence of adapted strong solution to the BSDE is proved under suitable terminal conditions including both European call and put options as special cases. Third, by combining the solution of the BSDE and the VOMM, we reach the justification of the global risk optimality for our hedging strategy.

scholarly journals Financial market models with Lévy processes and time-varying volatility

2008 ◽  
Vol 32 (7) ◽  
pp. 1363-1378 ◽  
Author(s):  
Young Shin Kim ◽  
Svetlozar T. Rachev ◽  
Michele Leonardo Bianchi ◽  
Frank J. Fabozzi
Keyword(s):  
Financial Market ◽  
Lévy Processes ◽  
Levy Processes ◽  
Time Varying ◽  
Market Models

LIQUIDITY PROVISION IN CAPACITY-CONSTRAINED MARKETS

2011 ◽  
Vol 15 (S1) ◽  
pp. 119-144 ◽  
Author(s):  
Pierre-Olivier Weill
Keyword(s):  
Financial Market ◽  
Asset Allocation ◽  
Capacity Constraint ◽  
Market Makers ◽  
Liquidity Provision ◽  
Bid Ask Spread ◽  
Time Variations ◽  
Capacity Constrained ◽  
Constrained Markets ◽  
Over Time

We study a competitive dynamic financial market subject to a transient selling pressure when market makers face a capacity constraint on their number of trades per unit of time with outside investors. We show that profit-maximizing market makers provide liquidity in order to manage their trading capacity constraint optimally over time: they use slack trading capacity early to accumulate assets when the selling pressure is strong in order to relax their trading capacity constraint and sell to buyers more quickly when the selling pressure subsides. When the trading capacity constraint binds, the bid–ask spread is strictly positive, widening and narrowing as market makers build up and unwind their inventories. Because the equilibrium asset allocation is constrained Pareto-optimal, the time variations in bid–ask spread are not a symptom of inefficient liquidity provision.

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