Let $(X_t)_{t\ge0}$ be a continuous-time, time-homogeneous strong Markov process with possible jumps and let $\tau$ be its first hitting time of a Borel subset of the state space. Suppose $X$ is sampled at random times and suppose also that $X$ has not hit the Borel set by time $t$. What is the...

We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical tractability, the model allows to obtain analytical...

This article presents a new definition of market completeness that is independent of the notions of no arbitrage and equivalent martingale measures. Our definition has many advantages, all shown herein. First, it preserves the Second Fundamental Theorem of Asset Pricing, even in complex...

This paper investigates the relation between ex-dividend stock price behavior and arbitrage oppor tunities. In a continuous trading, frictionless economy, the authors demonstrate that it is possible for the ex-dividend stock price drop to differ from the dividend, and still short-term traders...

This article provides a new methodology for pricing and hedging derivative securities involving credit risk. Two types of credit risks are considered. The first is where the asset underlying the derivative security may default. The second is where the writer of the derivative security may...

This paper studies the impact that margin requirements have on both the existence of arbitrage opportunities and the valuation of ca ll options. In the context of the Black-Scholes economy, margin restr ictions are shown to exclude continuous-trading arbitrage opportuniti es, and with two...

This article provides a Markov model for the term structure of credit risk spreads. The model is based on Jarrow and Turnbull (1995), with the bankruptcy process following a discrete state space Markov chain in credit ratings. The parameters of this process are easily estimated using observable...