Many arbitrage strategies are dominated by a few large arbitrageurs who recognize their price impact. I model arbitrageurs as imperfectly competitive intermediaries facilitating risk-sharing between two clienteles of competitive investors. I show that in the presence of market power, i)...

We derive the discrete-time arbitrage-free Nelson-Siegel class of term structure models with an exact solution and proof of uniqueness. We design a fast and reliable estimation procedure based on reduced-dimension optimization with multistep embedded regressions. After an analytical...

We propose a method for determining an arbitrage-free density implied by Hagan’s formula. Our technique is based on the stochastic collocation method. The principle is to determine a few collocation points on the implied survival distribution function (SDF) and project them on a polynomial of...

This paper examines the likely market for electrical energy storage from a market viewpoint, taking market prices as given and determining the extent to which a strategy of arbitrage across the day, buying at the lowest price times at night and selling at the highest times during the early...

We develop a multivariate statistical arbitrage strategy based on vine copulas - a highly flexible instrument for linear and nonlinear multivariate dependence modeling. In an empirical application on the S&P 500, we find statistically and economically significant returns of 9.25 percent p.a. and...

The capital structure arbitrage strategy exploits the discrepancies between the credit default swap and equity markets. It assumes that both markets instantaneously react to new information, so it fails to take into account the lead-lag relationships between the prices in the two markets and...