We show the existence of a continuous-time Nash equilibrium in a financial market with risk averse market makers and an informed trader with a private information. The unwillingness of market makers to bear risk causes the informed trader to absorb large shocks in their inventories. The informed...

We propose that predictability is a prerequisite for profitability on financial markets. We look at ways to measure predictability of price changes using information theoretic approach and employ them on all historical data available for NYSE 100 stocks. This allows us to determine whether...

We propose a novel algorithm - Multifractal Cross-Correlation Analysis (MFCCA) - that constitutes a consistent extension of the Detrended Cross-Correlation Analysis (DCCA) and is able to properly identify and quantify subtle characteristics of multifractal cross-correlations between two time...

We discuss the pricing of defaultable assets in an incomplete information model where the default time is given by a first hitting time of an unobservable process. We show that in a fairly general Markov setting, the indicator function of the default has an absolutely continuous compensator....

A simple spin system is constructed to simulate dynamics of asset prices and studied numerically. The outcome for the distribution of prices is shown to depend both on the dimension of the system and the introduction of price into the link measure. For dimensions below 2, the associated risk is...

This paper is devoted to revealed preference theory and its applications to testing economic data for consistency with utility maximization hypothesis, construction of index numbers, and forecasting. The quantitative measures of inconsistency of economic data with utility maximization behavior...

In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved using (EBAMM) as an equivalent condition for...

We show that \emph{No unbounded profit with bounded risk} (NUPBR) implies \emph{predictable uniform tightness} (P-UT), a boundedness property in the Emery topology which has been introduced by C. Stricker \cite{S:85}. Combining this insight with well known results from J. M\'emin and L....

The issue of constructing a risk minimizing hedge with additional constraints on the shortfall risk is examined. Several classical risk minimizing problems have been adapted to the new setting and solved. The existence and specific forms of optimal strategies in a general semimartingale market...

This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with counterparty risk provision, and show that it is a unique...