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.
New method for pricing financial products without no-arbitrage condition.
In discrete time markets with proportional transaction costs, Schachermayer (2004) shows that robust no-arbitrage is equivalent to the existence of a strictly consistent price system. In this paper, we introduce the concept of prospective strict no-arbitrage that is a variant of the strict no-arbitrage property from Ka…
Paper develops a continuous-time framework for financial markets without stochastic calculus.
Theory of price impact on bond term structure.
We generalize Merton's asset valuation approach to systems of multiple financial firms where cross-ownership of equities and liabilities is present. The liabilities, which may include debts and derivatives, can be of differing seniority. We derive equations for the prices of equities and recovery claims under no-arbitr…
Develops a framework for consistent pricing of interest rate derivatives.
Paper presents a data-driven method for option pricing.
Develops a deep learning method for enforcing no-arbitrage in local volatility surfaces.
We propose a unified analysis of a whole spectrum of no-arbitrage conditions for financial market models based on continuous semimartingales. In particular, we focus on no-arbitrage conditions weaker than the classical notions of No Arbitrage and No Free Lunch with Vanishing Risk. We provide a complete characterisation…
The study examines a financial model with sticky prices and finds no arbitrage when interest rate is zero.
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction assumption is equivalent to the existence of a risk-neutral measure. We derive dual repre…
Study analyzes bond price covariation robustly under no-arbitrage conditions.
Abstract framework for no-arbitrage concepts in topological vector lattices.
Reflected geometric Brownian motion models are not arbitrage-free.
In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit maximization problem of an agent, producing and storing a commodity while trading…
Market impact is the link between the volume of a (large) order and the price move during and after the execution of this order. We show that under no-arbitrage assumption, the market impact function can only be of power-law type. Furthermore, we prove that this implies that the macroscopic price is diffusive with roug…
For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. We propose a new approach for estimating the super-replication cost based on convex duality instead of martingale measures duality: Our prices will be expressed using Fenche…
Perpetual futures offer leverage without maturity, with prices influenced by funding rates.
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly non-dominated. Using a backward-forward scheme, we show that when the market consists of a…
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 . Under minimal assumptions on the random time and on the driving Brownian motions, we study the behavior of the model in all the filtrations whi…
The method constructs arbitrage-free option surfaces from noisy quotes using Chebyshev bases and a fog post-fit layer.
Monotonicity of normalized implied-volatility coordinates under no-arbitrage
We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage in the model when the driving noise is a stochastic string. Under the equivalent …
Proves FTAP in markets with or without transaction costs.
The paper sets criteria for no arbitrage in complex financial models.
Closed-form pricing method for multi-asset options.
DCNN improves volatility smile and skewness calibration without arbitrage constraints.
Novel approach to financial derivatives pricing using rough path theory.
The paper applies thermodynamics to financial markets to prove no-arbitrage constraints.
Paper establishes robust no-arbitrage conditions under projective determinacy.
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent to the existence of a collection of strictly consistent price systems.
We introduce the concept of no-arbitrage in a credit risk market under ambiguity considering an intensity-based framework. We assume the default intensity is not exactly known but lies between an upper and lower bound. By means of the Girsanov theorem, we start from the reference measure where the intensity is equal to…
The research presented in this work is motivated by recent papers by Brigo et al. (2011), Burgard and Kjaer (2009), Crépey (2012), Fujii and Takahashi (2010), Piterbarg (2010) and Pallavicini et al. (2012). Our goal is to provide a sound theoretical underpinning for some results presented in these papers by developing …
A simple quantitative example of a reflexive feedback process and the resulting price dynamics after an exogenous price shock to a financial network is presented. Furthermore, an outline of a theory that connects financial reflexivity, which stems from cross-ownership and delayed or incomplete information, and no-arbit…
We investigate the links between various no-arbitrage conditions and the existence of pricing functionals in general markets, and prove the Fundamental Theorem of Asset Pricing therein. No-arbitrage conditions, either in this abstract setting or in the case of a market consisting of European Call options, give rise to …
Based on a criterion of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity generators of log-price and volatility are independent or are the same, two versions …
Study asset pricing under model uncertainty with discrete time and states.
Extends pricing theory for collateralized derivatives to include jumps and dividends.
The study uses reproducing kernels to model bond discount curves.
We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with bid-ask spreads. In this set-up, we need to work with the notion of \emph{robust no…
We analyze the martingale selection problem of Rokhlin (2006) in a pointwise (robust) setting. We derive conditions for solvability of this problem and show how it is related to the classical no-arbitrage deliberations. We obtain versions of the Fundamental Theorem of Asset Pricing in examples spanning frictionless mar…
In frictionless financial markets, no-arbitrage is a local property in time. This means that a discrete time model is arbitrage-free if and only if there does not exist a one-period-arbitrage. With capital gains taxes, this equivalence fails. For a model with a linear tax and one non-shortable risky stock, we introduce…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes. The non-arbitrage property is not excluded if the class of admiss…
Two ML approaches learn local volatility surfaces from option prices, with GP being arbitrage-free.
We develop a novel framework for computing the total valuation adjustment (XVA) of a European claim accounting for funding costs, counterparty credit risk, and collateralization. Based on no-arbitrage arguments, we derive the nonlinear backward stochastic differential equations (BSDEs) associated with the replicating p…
Paper cleans option price datasets by removing outliers.
We consider a dynamic market model where buyers and sellers submit limit orders. If at a given moment in time, the buyer is unable to complete his entire order due to the shortage of sell orders at the required limit price, the unmatched part of the order is recorded in the order book. Subsequently these buy unmatched …
Based on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity generators of log-price and volatility are independent or are the same, two versions …