Risk-Averse Dynamic Arbitrage in Illiquid Markets - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Risk-Averse Dynamic Arbitrage in Illiquid Markets write by Somayeh Moazeni. This book was released on 2017. Risk-Averse Dynamic Arbitrage in Illiquid Markets available in PDF, EPUB and Kindle. Arguments on the existence of dynamic arbitrage and price manipulation strategies are often invoked to guide modeling price impacts of large trades. We revisit the concept of dynamic arbitrage in illiquid markets in the presence of time-varying stochastic price impact functions and a broad class of market price dynamics. We first establish a sufficient condition under which searching in the space of $ mathcal F_{0}$-measurable admissible round-trip trades is enough to attain a no-dynamic arbitrage certificate. This result simplifies identifying price impact structures that rule out dynamic arbitrage and supports the analysis in some existing literature, where its assessment is limited to the search in the set of $ mathcal F_{0}$-measurable round-trip trades. For time-varying stochastic linear price impact functions, we show that this condition is necessary and sufficient for the absence of dynamic arbitrage. The present quantitative analysis implies that a trader's opinion on the existence of dynamic arbitrage opportunities for a price impact model depends on his belief about expected future price changes and expected future price impacts, which can be revised over time by the collection of new information. This motivates us to let the existence of such arbitrage opportunities depend not only on the trader's belief about expected price movements but also on his risk attitude. We thus introduce the concept of risk-averse dynamic arbitrage using a general time-consistent dynamic risk measure and a risk-aversion threshold level. Similar sufficient conditions are studied under which searching in the space of static round-trip trades enables us to conclude on no-risk-averse dynamic arbitrage.
Losing Money on Arbitrage
Losing Money on Arbitrage - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Losing Money on Arbitrage write by Jun Liu. This book was released on 2001. Losing Money on Arbitrage available in PDF, EPUB and Kindle. In theory, an investor can make infinite profits by taking unlimited positions in an arbitrage. In reality, however, investors must satisfy margin requirements which completely change the economics of arbitrage. We derive the optimal investment policy for a risk-averse investor in a market where there are arbitrage opportunities. We show that is is often optimal to underinvest in the arbitrage by taking a smaller position than margin constraints allow. In some cases, it is actually optimal for an investor to walk away from a pure arbitrage opportunity. Even when the optimal policy is followed, the arbitrage strategy may underperform the riskless asset to have an unimpressive Sharpe ratio. Furthermore, the arbitrage portfolio typically experiences losses at some point before the final convergence date. These results have important implications for the role of arbitrageurs in financial markets.
Dynamic Strategic Arbitrage
Dynamic Strategic Arbitrage - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Dynamic Strategic Arbitrage write by Vincent Fardeau. This book was released on 2016. Dynamic Strategic Arbitrage available in PDF, EPUB and Kindle. Many arbitrage strategies are dominated by a few large arbitrageurs who recognize their price impact. I model arbitrageurs as imperfectly competitive intermediaries facilitating risk-sharing between two clienteles of competitive investors. I show that in the presence of market power, i) anticipated supply shocks generate time-series momentum and reversals around the realization of the shocks, ii) negative supply shocks can trigger counterintuitive changes in the sign of liquidity premia, and iii) more risk-averse arbitrageurs may provide more liquidity. Further, a higher trading frequency increases market depth.
Waiting for Capital
Waiting for Capital - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Waiting for Capital write by Barney Hartman-Glaser. This book was released on 2022. Waiting for Capital available in PDF, EPUB and Kindle. We consider a firm with infrequent access to capital markets, continuous access to financing by a risk-averse intermediary, and a cost of holding cash. The intermediary absorbs a fraction of cash-flow risk that decreases with the firm's liquidity reserves and acquires a stake in the firm under distress. Implementing the optimal contract suggests an overlapping pecking order. The firm simultaneously finances shortfalls with cash reserves and a credit line and sells equity to the intermediary when it runs out of cash. The model helps explain empirical facts and trends in financial intermediation, such as the rise of private equity.
Finance at Fields
Finance at Fields - read free eBook in online reader or directly download on the web page. Select files or add your book in reader. Download and read online ebook Finance at Fields write by Matheus R. Grasselli. This book was released on 2013. Finance at Fields available in PDF, EPUB and Kindle. This outstanding collection of articles includes papers presented at the Fields Institute, Toronto, as part of the Thematic Program in Quantitative Finance that took place in the first six months of the year 2010. The scope of the volume is very broad, with papers on foundational issues in mathematical finance, papers on computational finance, and papers on derivatives and risk management. Many of the articles contain path-breaking insights that are relevant to the developing new order of post-crisis financial risk management.
