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Belief-neutral efficiency in financial markets

Beißner, Patrick; Riedel, Frank - 2025

Heterogeneous beliefs among market participants can lead to questionable speculative trading that goes beyond any risk-sharing motives. We demonstrate that such unwarranted betting behavior in market equilibrium can be mitigated by introducing nonlinear pricing for ambiguous contracts, without...

Persistent link: https://www.econbiz.de/10015272951

A Dual Characterisation of Regulatory Arbitrage for Expected Shortfall

Herdegen, Martin - 2019

arbitrage and show that the presence or absence of regulatory arbitrage for ES is intimately linked to the fine structure of … regulatory arbitrage for ES at confidence level α if and only if there exists an EMM Q ≈ P such that ll dQ/dP ll<sub>∞</sub> < 1 …

Persistent link: https://www.econbiz.de/10012888963

Ordering Arbitrage Portfolios and Finding Arbitrage Opportunities

Arvanitis, Stelios; Post, Thierry - 2021

Concepts are introduced for analyzing arbitrage portfolios in the face of ambiguity about investor risk preferences and … initial portfolio holdings. A Stochastic Arbitrage Opportunity is a self-financing overlay portfolio which enhances every … developed to analyze the behavior of the empirical optimal arbitrage portfolio if the latent parameters of the joint payoff …

Persistent link: https://www.econbiz.de/10013232313

Inherent efficiency, security markets, and the pricing of investment strategies

Zou, Liang - 2000

markets. Issues concerning individualoptimality, (approximate) arbitrage,capital market equilibrium, and Pareto efficiency are …

Persistent link: https://www.econbiz.de/10011304380

Stochastic dominance and Omega ratio : measures to examine market efficiency, arbitrage opportunity, and anomaly

Guo, Xu; Jiang, Xuejun; Wong, Wing Keung - In: Economies : open access journal 5 (2017) 4, pp. 1-16

arbitrage opportunity in the market and whether there is any anomaly in the market. In this paper, we first study the … Hong Kong real estate market is not efficient and there are expected arbitrage opportunities and anomalies in the Hong Kong …

Persistent link: https://www.econbiz.de/10011772356

Trading Strategies within the Edges of No-Arbitrage

Cartea, Álvaro - 2015

a multivariate reflected Brownian motion on the closure of a no-arbitrage region which is dictated by the assets' bid … vector of midprices is from the no-arbitrage bounds. When midprices are sufficiently far from the no-arbitrage edges, the … edge of the no-arbitrage region, the strategy executes a combination of market orders and limit orders to profit from …

Persistent link: https://www.econbiz.de/10013014883

Risk Arbitrage Opportunities for Stock Index Options

Post, Thierry - 2019

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 … portfolio restrictions. An active trading strategy based on the Stochastic Arbitrage system for front-month S&P500 stock index …

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

A Dual Characterisation of Regulatory Arbitrage for Coherent Risk Measures

Herdegen, Martin - 2020

portfolios exist. We call this situation regulatory arbitrage, and prove that it cannot be excluded – unless ρ is as conservative … measures, and give a necessary and sufficient characterization for regulatory arbitrage. We show that the presence or absence … of regulatory arbitrage for ρ is intimately linked to the interplay between the set of equivalent martingale measures …

Persistent link: https://www.econbiz.de/10012823360

Markets Do Not Select for a Liquidity Preference as Behavior Towards Risk

Hens, Thorsten; Schenk-Hoppé, Klaus Reiner - 2003

Tobin (1958) has argued that in the face of potential capital losses on bonds it is reasonable to hold cash as a means to transfer wealth over time. It is shown that this assertion cannot be sustained taking into account the evolution of wealth of cash holders versus non cash holders. Cash...

Persistent link: https://www.econbiz.de/10014032025

The Most Dangerous Model : A Natural Benchmark for Assessing Model Risk

Major, John - 2015

We examine the problem of decision making using a probabilistic model when there is material uncertainty concerning the accuracy of the model coupled with limited information about it. Such conditions could hold, for example, for the user of a complex commercial model of natural catastrophe...

Persistent link: https://www.econbiz.de/10013022005