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Option Pricing by Mathematical Programming

Flåm, Sjur - 2007

Financial options typically incorporate times of exercise. Alternatively, they embody set-up costs or indivisibilities … here that integrality constraints can often be relaxed. In fact, simple mathematical programming, aimed at arbitrage or …

Persistent link: https://www.econbiz.de/10013208513

The Robustness of the CAPM - A Computational Approach

Herings, P.J.J.; Kubler, F. - Tilburg University, Center for Economic Research - 1999

In this paper we argue that in realistically calibrated two period general equilibrium models with incomplete markets CAPM-pricing provides a good benchmark for equilibrium prices even when agents are not mean-variance optimizers and returns are not normally distributed. We numerically...

Persistent link: https://www.econbiz.de/10011092773

Adaptive Learning in Stochastic Nonlinear Models When Shocks Follow a Markov Chain.

Honkapohja, Seppo; Mitra, Kaushik - Økonomisk Institut, Københavns Universitet

Local convergence results for adaptive learning of stochastic steady states in nonlinear models are extended to the case where the exogenous observable variables follow a ?nite Markov chain. The stability conditions for the corresponding nonstochastic model and its steady states yield...

Persistent link: https://www.econbiz.de/10005749574

Memory and Asset Pricing Models with Heterogeneous Beliefs

Verbic, Miroslav - Volkswirtschaftliche Fakultät, … - 2006

The paper discusses the role of memory in asset pricing models with heterogeneous beliefs. In particular, we were interested in how memory in the fitness measure affects stability of evolutionary adaptive systems and survival of technical trading. In order to obtain an insight into this matter...

Persistent link: https://www.econbiz.de/10005789598

Existence and uniqueness of equilibrium in Lucas' asset pricing model when utility is unbounded

Brogueira, Joao; Schuetze, Fabian - Department of Economics, European University Institute - 2015

This note proves existence of a unique equilibrium in a Lucas (1978) economy when the utility function displays constant relative risk aversion and log dividends follow a normally distributed AR(1) process with positive auto-correlation. In particular, the note provides restrictions on the...

Persistent link: https://www.econbiz.de/10011252964

Slow Arbitrage

Blatt, Julien - 2018

This paper develops a dynamic model in which financially constrained agents search for markets which are subject to decreasing returns to scale. In equilibrium, agents only invest in markets with total capital below an endogenous threshold that depends on the equilibrium distribution of capital...

Persistent link: https://www.econbiz.de/10012915373

Risk Arbitrage Opportunities for Stock Index Options

Post, Thierry - 2019

To analyze the economic significance of pricing errors of stock index options, a system of linear inequalities is … developed which completely characterizes all risk arbitrage opportunities which arise if a well-behaved pricing kernel does not … exist. The Stochastic Arbitrage system can account for market imperfections in the form of transactions costs and general …

Persistent link: https://www.econbiz.de/10012899380

Multi-Asset Optimal Execution and Statistical Arbitrage Strategies under Ornstein-Uhlenbeck Dynamics

Bergault, Philippe; Drissi, Fayçal; Gueant, Olivier - 2023

optimal execution and statistical arbitrage …

Persistent link: https://www.econbiz.de/10014256056

Joint Arbitrage Conditions for Stock Index Options and Volatility Index Options

Post, Thierry - 2023

We analyze the joint cross-section of monthly S&P500 stock index options and monthly CBOE Volatility Index options by …

Persistent link: https://www.econbiz.de/10014351229

Von Neumann-Gale Model, Market Frictions, and Capital Growth

Babaei, Esmaeil - 2019

The aim of this work is to extend the classical capital growth theory pertaining to frictionless financial markets to models taking into account various kinds of frictions, including transaction costs and portfolio constraints. A natural generalization of the notion of a benchmark investment...

Persistent link: https://www.econbiz.de/10012895057