During times of market stress, arbitrage capital cannot be timely deployed, and assets trade away from fundamentals. This gives rise to transitory price volatility, a latent factor that signals difficulties in the market-making process. I propose a market-wide illiquidity measure based on SPY's...

Concepts are introduced for analyzing arbitrage portfolios in the face of ambiguity about investor risk preferences and initial portfolio holdings. A Stochastic Arbitrage Opportunity is a self-financing overlay portfolio which enhances every feasible host portfolio for all relevant utility...

Classical wealth management heavily relies on the linear and two-dimensional world of Modern Portfolio Theory. While this has generally worked for investors, many new investment offerings only inadequately map into the CW world. This inadequacy is a source of potentially large investor losses,...

The European Union's push towards market-based procurement of redispatch services has sparked fears of so called Inc-Dec-Gaming, i.e. the incentive to engage in arbitrage between the national wholesale market and the local redispatch market. The latter would increase both likelihood and severity...

We propose an affine term structure model that allows for tenor-dependence of yield curves andthus for different risk categories in interbank rates, an important feature of post-crisis interestrate markets. The model has a Nelson-Siegel factor loading structure and thus economicallywell...

Purpose - Nowadays popular algorithmic trading uses many strategies which are algoritmizable and promise profitability. This research assess if it is possible successfully use interest rates sensitivity arbitrage in bond portfolio (also known as convexity arbitrage) in financial praxis. This...