Log-concave densities characterized using peacock and zonoid concepts.
problem Characterizing log-concave densities.
method Characterization using peacock and zonoid concepts.
result Two characterizations of log-concave densities.
On-device research index
arXiv research
A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
169,341 papers · 148 categories
Trend · papers per month
48 results for “arbitrage-free asset pricing”
Two new methods for option pricing without or with a riskless asset.
problem Traditional option pricing methods require a riskless asset and may not be market-complete.
method Develops two approaches: one without a riskless asset and one with.
result Both methods produce the same option prices as classical approaches.
Simulates multi-asset spot and option markets using normalizing flows.
problem High-dimensionality of market call prices and dynamic preservation across simulators.
method Normalizing flows for efficient low-dimensional representations, conditional invertibility for joint distribution calibration.
result Calibrated simulators maintain dynamics of each underlying and accurately represent market call prices.
We find a condition for stable asset pricing models.
problem Existence and uniqueness of equilibrium asset prices.
method Exact necessary and sufficient condition derived through stochastic discount factor decompositions.
result Sharpens and improves previous results on asset pricing.
Simplified proof for asset pricing theory.
problem Complexity in asset pricing theory.
method Accessible proof without real-world measure.
result No need for real-world measure for derivative securities.
A new model prices assets considering market microstructure effects.
problem Including market microstructure effects in dynamic asset pricing.
method Discrete binary tree model with history-dependent underlying security prices.
result The model preserves historical price dynamics and is market-complete, arbitrage-free.
Study asset price bubbles using random matching and stochastic factors.
problem Understanding and modeling asset price bubbles through investor contagion.
method Developed a stochastic model of liquidity-based asset price bubbles using random matching mechanism.
result Derived conditions for arbitrage-free financial market models.
A new method calculates accurate SABR model option prices and deltas.
problem Inaccurate and arbitrageable SABR model option prices and deltas.
method Gaussian quadrature integration scheme for the normal SABR model.
result Accurate and arbitrage-free SABR model option prices and deltas calculated with 49 points.
The paper extends asset pricing theory by considering conditional markets.
problem Analyzing financial markets with conditional information.
method Time consistency properties of dynamic nonlinear expectations applied to super- and subhedging prices.
result Derives a conditional version of the second fundamental theorem of asset pricing.
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are presented. First, we derive arbitrage-free pricing rules based on hedging argumen…
Develops a valuation model for in-play football bets.
problem Valuation and hedging of in-play football bets.
method Model scores using independent Poisson processes, applies Fundamental Theorems of Asset Pricing.
result Derives arbitrage-free valuation formulas for in-play bets.
"Fundamental theorem of asset pricing" roughly states that absence of arbitrage opportunity in a market is equivalent to the existence of a risk-neutral probability. We give a simple counterexample to this oversimplified statement. Prices are given by linear forms which do not always correspond to probabilities. We giv…
New model prices corporate bonds by accounting for non-hedgeable risk.
problem Non-hedgeable risk in corporate bond pricing.
method Introduces a new model that drops liquidity assumption and uses a correlated liquid asset.
result Shows arbitrage-free formula for corporate bond pricing with non-hedgeable risk.
Study shows no sure profits via flash strategies if asset prices don't have predictable jumps.
problem Existence of sure profits via flash strategies in financial markets.
method Introduced and studied the notion of sure profit via flash strategy, proving the existence of such profits under specific conditions.
result No sure profits via flash strategies if and only if asset prices do not exhibit predictable jumps.
This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing kernel be consistent with a pair of axioms, one giving the inter-temporal relations …
Generative model uses DDPMs for risk-neutral derivative pricing.
problem Derivative pricing using arbitrage-free models.
method Developed a framework using DDPMs to generate risk-neutral asset price dynamics.
result Empirically validated the method for both European and path-dependent derivatives.
Paper proposes a method to robustly estimate volatility from OTM options.
problem Accurately measuring volatility in real-world markets with limited option trading.
method Constructs an arbitrage-free continuous option pricing function from bid-ask spreads of OTM options.
result Robustly calculates volatility indices with theoretical consistency, even in low-liquidity markets.
The study examines a financial model with sticky prices and finds no arbitrage when interest rate is zero.
problem Analyzing financial markets with sticky asset prices and proving no arbitrage conditions.
method Introduced a financial market model with a risky asset following a sticky geometric Brownian motion and a riskless asset with a constant interest rate. Proved no arbitrage conditions and derived pricing equations.
result No arbitrage conditions are met only when the interest rate is zero, and all replicable payoffs are derived under this condition.
Pricing European Options in Realistic Marketsphysics.soc-ph
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density conditional on the total variance of the asset's returns when the option expires.…
Study arbitrage-free models in financial markets under uncertainty.
problem Arbitrage-free modeling in financial markets with Knightian Uncertainty.
method Functional analytic approach, no specific assumptions on priors or state space.
result Absence of arbitrage equivalent to approximate martingale measures sharing the same polar set of priors.
In a market of deterministic cash flows, given as an additive, symmetric relation of exchangeability on the finite signed Borel measures on the non-negative real time axis, it is shown that the only arbitrage-free price functional that fulfills some additional mild requirements is the integral of the unit zero-coupon b…
Trader can make money without borrowing or short selling if they predict future prices perfectly.
problem Trading without borrowing or short selling is theoretically possible with perfect foresight.
method Constructs a self-financing process of finite variation using a semimartingale.
result Shows it's possible to make money without conventional arbitrage constraints.
A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is derived and several properties of this index are shown. In particular, it is proven…
The paper develops bounds for multi-asset derivatives using option prices.
problem Computing model-free upper and lower bounds for multi-asset derivatives.
method Develops a fundamental theorem of asset pricing and superhedging duality, recasting the problem into a linear semi-infinite optimization problem and providing algorithms for exact computation.
result Provides -optimal upper and lower bounds for multi-asset derivatives, characterizing optimal pricing measures.
Consistent valuation across different interest rate curves using pricing kernels.
problem Asset pricing with varying discount and cash flow rates.
method Pricing kernel framework linking distinct markets with consistent curve-conversion factors.
result Derivation of an across-curve pricing formula enabling consistent valuation and hedging.
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional time series of option prices corresponding to strikes (with large, e.g.…
The paper prices long-term options with a reflecting barrier model.
problem Pricing long-term options with asset price limits.
method Model asset price as geometric Brownian motion with a lower reflecting barrier, pricing options using compound options.
result Option prices can be determined using standard risk-neutral arguments, and hedging strategies are available.
Investigates trading with integer constraints in discrete time.
problem Trading with discrete, integer quantities under integer constraints.
method Establishes a novel theory of integer arbitrage-free pricing and hedging for non-rational price processes.
result The set of prices of a contingent claim is either empty or dense in an interval.
Study game options pricing in nonlinear markets, extending previous work.
problem Pricing game options in nonlinear markets without arbitrage.
method Detailed study of unilateral pricing, hedging, and exercising problems using BSDE approach.
result Explicit results obtained under suitable assumptions about solutions to BSDEs.
Proposes a method to construct risk-neutral marginals from arbitrage-free option prices.
problem Lack of risk-neutral marginals that are free of arbitrage and easy to use.
method Explicit construction of risk-neutral marginals from discrete arbitrage-free option prices.
result Explicit construction guarantees risk-neutral marginals free of butterfly and calendar arbitrage.
Develops a nonparametric model for arbitrage-free pricing of illiquid derivatives.
problem Modeling joint dynamics of liquid vanilla options for arbitrage-free pricing of illiquid derivatives.
method Derives a state space for prices respecting underlying financial constraints using neural networks and imposes constraints to preserve no-arbitrage conditions.
result Neural SDE models are guaranteed to satisfy a set of linear inequalities and validated with numerical experiments.
We introduce a natural generalization of the forward-starting options, first discussed by M. Rubinstein. The main feature of the contract presented here is that the strike-determination time is not fixed ex-ante, but allowed to be random, usually related to the occurrence of some event, either of financial nature or no…
A new method constructs smooth, arbitrage-free option surfaces efficiently.
problem Creating smooth, arbitrage-free option surfaces efficiently.
method Non-parametric approach using strictly positive 'discrete local volatility' variables.
result First construction of smooth, strictly arbitrage-free option price surfaces.
All DeFi markets are essentially CFMMs with increasing invariants.
problem Ensuring DeFi markets are free of arbitrage opportunities.
method Formalizing DeFi markets as CFMMs and proving the existence of increasing invariants.
result A DeFi market is arbitrage-free if and only if it has an increasing invariant.
The paper generalizes the Black-Scholes model and inequality.
problem Developing a new model for call price surfaces.
method Introducing a noncommutative semigroup structure and using convex order compatibility.
result Each one-parameter semigroup corresponds to a unique log-concave probability density.
Quantum computing speeds up option pricing for multiple assets.
problem High-dimensional integration bottleneck in option pricing.
method Calibrated marginal distributions, Gaussian copula, QAMC with QAE.
result QAMC reduces integration queries by 10-100 times for similar precision.
When the planning horizon is long, and the safe asset grows indefinitely, isoelastic portfolios are nearly optimal for investors who are close to isoelastic for high wealth, and not too risk averse for low wealth. We prove this result in a general arbitrage-free, frictionless, semimartingale model. As a consequence, op…
Revisits stochastic collocation with exponential splines for option pricing.
problem Improving the accuracy of option price interpolation using stochastic collocation.
method Uses exponential quadratic splines and optimizes abscissae or parameters of B-splines.
result Shows that fixing abscissae and optimizing parameters leads to better interpolation accuracy.
The paper calibrates a model to market quotes efficiently and arbitrage-free.
problem Calibrating a model to market option quotes efficiently and without arbitrage.
method Piecewise-linear local variance function for efficient calibration.
result Arbitrage-free interpolation of class achieved under one millisecond.
The paper develops a new framework for pricing and hedging liquidity in crypto markets.
problem Arbitrage and risk management in crypto market making.
method Developed a new mathematical framework using a coordinate system defined by price and intrinsic liquidity.
result Established a linear dependence of asset reserves and value functions on intrinsic liquidity, facilitating arbitrage-free pricing and delta hedging.
We consider model-free pricing of digital options, which pay out if the underlying asset has crossed both upper and lower barriers. We make only weak assumptions about the underlying process (typically continuity), but assume that the initial prices of call options with the same maturity and all strikes are known. Unde…
Develops a model to predict BitCoin prices influenced by confidence.
problem Predicting BitCoin prices influenced by confidence and sentiment.
method Continuous-time bivariate model with a delay between confidence indicator and BitCoin price.
result Arbitrage-free model and quasi-closed formula for European style derivatives.
Financial models are studied where each asset may potentially lose value relative to any other. Conditioning on non-devaluation, each asset can serve as proper numéraire and classical valuation rules can be formulated. It is shown when and how these local valuation rules can be aggregated to obtain global arbitrage-fre…
The paper extends a variance gamma model to quadratic functions, reducing arbitrage and computational costs.
problem Creating an arbitrage-free interpolation for option pricing models.
method Generalizing the local variance gamma model to a piecewise quadratic local variance function.
result The quadratic model results in an arbitrage-free interpolation of class C3, reducing knots and computational cost.
Generative diffusion models forecast implied vol surfaces without arbitrage issues.
problem Forecasting arbitrage-free implied volatility surfaces using historical data with path-dependent dynamics.
method Generative diffusion model (DDPM) with conditional training on market variables, including EWMAs and returns. Dynamic penalty scheme based on SNR to enforce arbitrage-free surfaces.
result Superior performance in volatility forecasting compared to existing methods.
Method interpolates option prices and volatilities without arbitrage.
problem Interpolating option prices and volatilities without arbitrage.
method Sparse modeling approach based on integral equations and SVD.
result Flexible and efficient framework for arbitrage-free interpolation.
We introduce a multivariate diffusion model that is able to price derivative securities featuring multiple underlying assets. Each asset volatility smile is modeled according to a density-mixture dynamical model while the same property holds for the multivariate process of all assets, whose density is a mixture of mult…
Arbitrage-Free Option Price Surfaces via Chebyshev Tensor Bases and a Hamiltonian Fog Post-Fitq-fin.MF
The method constructs arbitrage-free option surfaces from noisy quotes using Chebyshev bases and a fog post-fit layer.
problem Constructing arbitrage-free option price surfaces from noisy bid-ask quotes.
method Chebyshev tensor bases, linear sampling, no-arbitrage operators, quadratic objective, OSQP solvers, fog post-fit layer, Hamiltonian energy.
result High inside-spread coverage (98-99%) and low no-arbitrage violations (below 1%) in stable periods, controlled leakage in stressed periods.