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Resultados filtrados por Publicador: Universidade Cornell

A Harmonic Analysis Solution to the Static Basket Arbitrage Problem

d'Aspremont, Alexandre
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 02/09/2003 Português
Relevância na Pesquisa
26.74%
We consider the problem of computing upper and lower bounds on the price of a European basket call option, given prices on other similar baskets. We focus here on an interpretation of this program as a generalized moment problem. Recent results by Berg & Maserick (1984), Putinar & Vasilescu (1999) and Lasserre (2001) on harmonic analysis on semigroups, the K-moment problem and its applications to optimization, allow us to derive tractable necessary and sufficient conditions for the absence of static arbitrage between basket straddles, hence between basket calls and puts.; Comment: Preliminary version for IMA workshop "Risk Management and Model Specifications Issues in Finance". Numerical results to be added later

Market viability via absence of arbitrage of the first kind

Kardaras, Constantinos
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
In a semimartingale financial market model, it is shown that there is equivalence between absence of arbitrage of the first kind (a weak viability condition) and the existence of a strictly positive process that acts as a local martingale deflator on nonnegative wealth processes.; Comment: 15 pages. Updated, more self-contained version

Flexible least squares for temporal data mining and statistical arbitrage

Montana, Giovanni; Triantafyllopoulos, Kostas; Tsagaris, Theodoros
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 25/09/2007 Português
Relevância na Pesquisa
26.74%
A number of recent emerging applications call for studying data streams, potentially infinite flows of information updated in real-time. When multiple co-evolving data streams are observed, an important task is to determine how these streams depend on each other, accounting for dynamic dependence patterns without imposing any restrictive probabilistic law governing this dependence. In this paper we argue that flexible least squares (FLS), a penalized version of ordinary least squares that accommodates for time-varying regression coefficients, can be deployed successfully in this context. Our motivating application is statistical arbitrage, an investment strategy that exploits patterns detected in financial data streams. We demonstrate that FLS is algebraically equivalent to the well-known Kalman filter equations, and take advantage of this equivalence to gain a better understanding of FLS and suggest a more efficient algorithm. Promising experimental results obtained from a FLS-based algorithmic trading system for the S&P 500 Futures Index are reported.; Comment: 28 pages, 6 figures, submitted to journal

Arbitrage and deflators in illiquid markets

Pennanen, Teemu
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
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 account/numeraire. In addition to classical frictionless markets and markets with transaction costs or bid-ask spreads, our framework covers markets with nonlinear illiquidity effects for large instantaneous trades. In the presence of nonlinearities, the classical notion of arbitrage turns out to have two equally meaningful generalizations, a marginal and a scalable one. We study their relations to state price deflators by analyzing two auxiliary market models describing the local and global behavior of the cost functions and constraints.

Optimization of relative arbitrage

Wong, Ting-Kam Leonard
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
In stochastic portfolio theory, a relative arbitrage is an equity portfolio which is guaranteed to outperform a benchmark portfolio over a finite horizon. When the market is diverse and sufficiently volatile, and the benchmark is the market or a buy-and-hold portfolio, functionally generated portfolios introduced by Fernholz provide a systematic way of constructing relative arbitrages. In this paper we show that if the market portfolio is replaced by the equal or entropy weighted portfolio among many others, no relative arbitrages can be constructed under the same conditions using functionally generated portfolios. We also introduce and study a shaped-constrained optimization problem for functionally generated portfolios in the spirit of maximum likelihood estimation of a log-concave density.; Comment: 33 pages, 5 figures, 2 tables; revised version

Maximizing expected utility in the Arbitrage Pricing Model

Rasonyi, Miklos
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 31/08/2015 Português
Relevância na Pesquisa
26.74%
We treat an infinite dimensional optimization problem arising in economic theory. Under appropriate conditions, we show the existence of an optimal strategy for an investor trading in the classical Arbitrage Pricing Model of S. A. Ross. As a consequence, we derive the existence of equivalent risk-neutral measures of a particular form which have favourable integrability properties.

Intuitive Proof of Black-Scholes Formula Based on Arbitrage and Properties of Lognormal Distribution

Krouglov, Alexei
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 03/12/2006 Português
Relevância na Pesquisa
26.74%
Presented is intuitive proof of Black-Scholes formula for European call options, which is based on arbitrage and properties of lognormal distribution. Paper can help students and non-mathematicians to better understand economic concepts behind one of the biggest achievements in modern financial theory.; Comment: 7 pages

Information, no-arbitrage and completeness for asset price models with a change point

Fontana, Claudio; Grbac, Zorana; Jeanblanc, Monique; Li, Qinghua
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
We consider a general class of continuous asset price models where the drift and the volatility functions, as well as the driving Brownian motions, change at a random time $\tau$. Under minimal assumptions on the random time and on the driving Brownian motions, we study the behavior of the model in all the filtrations which naturally arise in this setting, establishing martingale representation results and characterizing the validity of the NA1 and NFLVR no-arbitrage conditions.; Comment: 21 pages

Dynamic modeling of mean-reverting spreads for statistical arbitrage

Triantafyllopoulos, Kostas; Montana, Giovanni
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
Statistical arbitrage strategies, such as pairs trading and its generalizations, rely on the construction of mean-reverting spreads enjoying a certain degree of predictability. Gaussian linear state-space processes have recently been proposed as a model for such spreads under the assumption that the observed process is a noisy realization of some hidden states. Real-time estimation of the unobserved spread process can reveal temporary market inefficiencies which can then be exploited to generate excess returns. Building on previous work, we embrace the state-space framework for modeling spread processes and extend this methodology along three different directions. First, we introduce time-dependency in the model parameters, which allows for quick adaptation to changes in the data generating process. Second, we provide an on-line estimation algorithm that can be constantly run in real-time. Being computationally fast, the algorithm is particularly suitable for building aggressive trading strategies based on high-frequency data and may be used as a monitoring device for mean-reversion. Finally, our framework naturally provides informative uncertainty measures of all the estimated parameters. Experimental results based on Monte Carlo simulations and historical equity data are discussed...

No-arbitrage of second kind in countable markets with proportional transaction costs

Bouchard, Bruno; Taflin, Erik
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
Motivated by applications to bond markets, we propose a multivariate framework for discrete time financial markets with proportional transaction costs and a countable infinite number of tradable assets. We show that the no-arbitrage of second kind property (NA2 in short), recently introduced by Rasonyi for finite-dimensional markets, allows us to provide a closure property for the set of attainable claims in a very natural way, under a suitable efficient friction condition. We also extend to this context the equivalence between NA2 and the existence of many (strictly) consistent price systems.; Comment: Published in at http://dx.doi.org/10.1214/11-AAP825 the Annals of Applied Probability (http://www.imstat.org/aap/) by the Institute of Mathematical Statistics (http://www.imstat.org)

Trend arbitrage, bid-ask spread and market dynamics

Zaitsev, Nikolai
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 10/07/2006 Português
Relevância na Pesquisa
26.74%
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between trend, bid-ask spread, market reaction and average update frequency of price information. Average time of market reaction is measured from market data. This parameter is interpreted as a constant value of the stock exchange and is attributed to the latency of exchange reaction to actions of traders. This latency and cost of trade are shown to be the main limit of bid-ask spread. Data analysis also suggests some relationships between trend, bid-ask spread and average frequency of price update process.; Comment: 21 pages, 15 figures, 3 tables, submitted to "Quantitative Finance"

Pricing rule based on non-arbitrage arguments for random volatility and volatility smile

Dokuchaev, Nikolai
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 10/05/2002 Português
Relevância na Pesquisa
26.74%
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that gives Black-Scholes price for at-money options and such that the market is arbitrage free for any number of tradable options, even if there are two Brownian motions only: one drives the stock price, the other drives the volatility process. This problem is reduced to solving a parabolic equation.; Comment: 18 pages

On Arbitrage and Duality under Model Uncertainty and Portfolio Constraints

Bayraktar, Erhan; Zhou, Zhou
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
26.74%
We consider the fundamental theorem of asset pricing (FTAP) and hedging prices of options under non-dominated model uncertainty and portfolio constrains in discrete time. We first show that no arbitrage holds if and only if there exists some family of probability measures such that any admissible portfolio value process is a local super-martingale under these measures. We also get the non-dominated optional decomposition with constraints. From this decomposition, we get duality of the super-hedging prices of European options, as well as the sub- and super-hedging prices of American options. Finally, we get the FTAP and duality of super-hedging prices in a market where stocks are traded dynamically and options are traded statically.; Comment: Final version. To appear in Mathematical Finance

Non-Arbitrage Under Additional Information for Thin Semimartingale Models

Aksamit, Anna; Choulli, Tahir; Deng, Jun; Jeanblanc, Monique
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 05/05/2015 Português
Relevância na Pesquisa
26.74%
This paper completes the two studies undertaken in \cite{aksamit/choulli/deng/jeanblanc2} and \cite{aksamit/choulli/deng/jeanblanc3}, where the authors quantify the impact of a random time on the No-Unbounded-Risk-with-Bounded-Profit concept (called NUPBR hereafter) when the stock price processes are quasi-left-continuous (do not jump on predictable stopping times). Herein, we focus on the NUPBR for semimartingales models that live on thin predictable sets only and the progressive enlargement with a random time. For this flow of information, we explain how far the NUPBR property is affected when one stops the model by an arbitrary random time or when one incorporates fully an honest time into the model. This also generalizes \cite{choulli/deng} to the case when the jump times are not ordered in anyway. Furthermore, for the current context, we show how to construct explicitly local martingale deflator under the bigger filtration from those of the smaller filtration.; Comment: This paper develops the part of thin and single jump processes mentioned in our earlier version: "Non-arbitrage up to random horizon and after honest times for semimartingale models", Available at: arXiv:1310.1142v1. arXiv admin note: text overlap with arXiv:1404.0410

Calibration and simulation of arbitrage effects in a non-equilibrium quantum Black-Scholes model by using semiclassical methods

Contreras, Mauricio; Pellicer, Rely; Santiagos, Daniel; Villena, Marcelo
Fonte: Universidade Cornell Publicador: Universidade Cornell
Tipo: Artigo de Revista Científica
Publicado em 16/12/2015 Português
Relevância na Pesquisa
26.74%
An interacting Black-Scholes model for option pricing, where the usual constant interest rate r is replaced by a stochastic time dependent rate r(t) of the form r(t)=r+f(t) dW/dt, accounting for market imperfections and prices non-alignment, was developed in [1]. The white noise amplitude f(t), called arbitrage bubble, generates a time dependent potential U(t) which changes the usual equilibrium dynamics of the traditional Black-Scholes model. The purpose of this article is to tackle the inverse problem, that is, is it possible to extract the time dependent potential U(t) and its associated bubble shape f(t) from the real empirical financial data? In order to give an answer to this question, the interacting Black-Scholes equation must be interpreted as a quantum Schrodinger equation with hamiltonian operator H=H0+U(t), where H0 is the equilibrium Black-Scholes hamiltonian and U(t) is the interaction term. If the U(t) term is small enough, the interaction potential can be thought as a perturbation, so one can compute the solution of the interacting Black-Scholes equation in an approximate form by perturbation theory. In [2] by applying the semi-classical considerations, an approximate solution of the non equilibrium Black-Scholes equation for an arbitrary bubble shape f(t) was developed. Using this semi-classical solution and the knowledge about the mispricing of the financial data...