Real-world arbitrage often involves a limited number of large financial intermediaries (e.g. dealers, hedge funds) with price impact. I study a multi-period model of imperfectly competitive arbitrage, in which supply shocks generate price di fferences between two identical assets traded in...

Option prices, particularly those of out-of-the-money equity index puts, are difficult to justify in a no-arbitrage framework. This paper shows how limits to arbitrage affect the relative pricing of out-of-the-money put vs. call options (option-implied skewness). Decomposing the price of...

This chapter reviews some of the academic literature that links nominal and real term structures with the macroeconomy. The main conclusion is that none of our models is consistent with basic properties of nominal yields. It is difficult to explain the average shape of the nominal yield curve,...

Contrary to what traditional asset pricing would imply, a strategy that bets against beta, by going long in low beta stocks and short in high beta stocks, tends to outperform the market. We consider a market in which diversity is maintained, i.e. no single stock can dominate the entire market,...

Survival conditions ensure the presence of consumptions that cost less than the total contingent income of agents in general equilibrium models. These conditions are generally fulfilled in competitive equilibrium. This paper shows the existence of equilibrium for incomplete-market economies...

We show that a combined bet at the bookmaker and at the bet exchange market yields a guaranteed positive return in 19.2% of the matches in the top-five European soccer leagues. Moreover, we find that all considered bookmakers frequently offered arbitrage positions, and that they experienced, on...

When pricing an in-arrears term structure product, the valuation usually boils down to determining the price of a vanilla product and of some additional part. To computer the price of the additional part, sometimes a specific term structure (like Gaussian or LIBOR) is assumed. Sometimes...