Suppose X is an infinite-dimensional ordered topological vector space. Suppose a linear and positive price functional ϕ is given on a subspace Z of marketed claims. The so-called valuation problem is about the following question: does there exist a continuous, strictly positive, linear...

This paper tests the idea that financial intermediaries who act as arbitrageurs in the asset market help determine the equilibrium risk of financial assets. They do this by turning “alphas” into “betas”; assets with large abnormal returns attract more arbitrage and covary correspondingly...

This paper develops useful theory of arbitrage and risk arbitrage. It describes a prize winning successful risk arbitrage involving Nikkei put warrants trading on the Toronto and American stock exchanges. The paper describes the various types of contracts and how the risk arbitrage was traded...

This paper considers fundamental questions of arbitrage pricing that arises when the uncertainty model incorporates ambiguity about risk. This additional ambiguity motivates a new principle of risk- and ambiguity-neutral valuation as an extension of the paper by Ross (1976) (Ross, Stephen A....

We show how to set up a forward rate model in the presence of volatility uncertainty by using the theory of G-Brownian motion. In order to formulate the model, we extend the G-framework to integration with respect to two integrators and prove a version of Fubini's theorem for stochastic...

We study a portfolio selection problem in a continuous-time Itô–Markov additive market with prices of financial assets described by Markov additive processes that combine Lévy processes and regime switching models. Thus, the model takes into account two sources of risk: the jump diffusion...

In this paper, which is the third installment of the author´s trilogy on margin loan pricing, we analyze 1367 monthly observations of the U.S. broker call money rate, e.g., the interest rate at which stockbrokers can borrow to fund their margin loans to retail clients. We describe the basic...