arXiv · arXiv q-fin · 2015
In many developing countries intellectual property infringement and the commerce of pirate goods is an entrepreneurial activity. Digital piracy is very often the only media for having access to music, cinema, books and software. At the same time, bio-prospecting and infringement of indigenous knowledge rights by international consortiums is usual in places with high biodiversity. In these arenas transnational actors …
Manuel G. Chávez-Angeles, Patricia S. Sánchez-Medina
arXiv · arXiv q-fin · 2025
The usual formulas for the fair market valuation of a firm at time $t$ include the profits accruing to the shares at time $t$ from the use of wage or salaried labor in the future. But in employee-owned firms or partnerships, the future worker-members or partners are the residual claimants at those future times, so in those cases, the future residuals do not accrue to the current shareholder/residual-claimants. Hence …
David Ellerman
arXiv · arXiv · 2021
This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers liability liquidity risk (or funding liquidity) modeling, the second dimension focuses on asset liquidity risk (or market liquidity) modeling, and the third dimension considers the asset-liability management of the liquidity gap risk (or asset-liability…
Thierry Roncalli, Amina Cherief, Fatma Karray-Meziou, Margaux Regnault
arXiv · arXiv · 2025
Concentrated-liquidity automated market makers (CLAMMs), as exemplified by Uniswap v3, are now a common primitive in decentralized finance frameworks. Their design combines continuous trading on constant-function curves with discrete tick boundaries at which liquidity positions change and rounding effects accumulate. While there is a body of economic and game-theoretic analysis of CLAMMs, there is negligible work tha…
Julius Tranquilli, Naman Gupta
arXiv · arXiv · 2023
We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs. We consider a market with a single risky asset whose ask price process is higher than or equal to its bid price process. Neither the concatenation property of the set of wealth pr…
Christoph Kühn
arXiv · arXiv · 2022
The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of market making has yet to be mathematically formulated in terms of volatility in the existing literature. We provide here a preliminary derivation of the payoff formula, by making the…
Jin Hong Kuan
arXiv · arXiv · 2021
The problem of portfolio management represents an important and challenging class of dynamic decision making problems, where rebalancing decisions need to be made over time with the consideration of many factors such as investors preferences, trading environments, and market conditions. In this paper, we present a new portfolio policy network architecture for deep reinforcement learning (DRL)that can exploit more eff…
Saeed Marzban, Erick Delage, Jonathan Yumeng Li, Jeremie Desgagne-Bouchard, Carl Dussault
arXiv · arXiv · 2017
We present a version of the fundamental theorem of asset pricing (FTAP) for continuous time large financial markets with two filtrations in an $L^p$-setting for $ 1 \leq p < \infty$. This extends the results of Yuri Kabanov and Christophe Stricker \cite{KS:06} to continuous time and to a large financial market setting, however, still preserving the simplicity of the discrete time setting. On the other hand it general…
Christa Cuchiero, Irene Klein, Josef Teichmann
arXiv · arXiv · 2015
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling framework to analyze the effects of trading frequency on market liquidity in a very general setting. In particular, we demonstrate the dual effect of high trading frequency. On the …
Roman Gayduk, Sergey Nadtochiy
arXiv · arXiv · 2014
In the context of large financial markets we formulate the notion of \emph{no asymptotic free lunch with vanishing risk} (NAFLVR), under which we can prove a version of the fundamental theorem of asset pricing (FTAP) in markets with an (even uncountably) infinite number of assets, as it is for instance the case in bond markets. We work in the general setting of admissible portfolio wealth processes as laid down by Y.…
Christa Cuchiero, Irene Klein, Josef Teichmann
arXiv · arXiv · 2009
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize their execution. To solve this problem we devised two stochastic recursive learning procedures which adjust the proportions of the order to be sent to the different venues, one based o…
Sophie Laruelle, Charles-Albert Lehalle, Gilles Pagès
arXiv · arXiv · 2017
We discuss the binary nature of funding impact in derivative valuation. Under some conditions, funding is either a cost or a benefit, i.e., one of the lending/borrowing rates does not play a role in pricing derivatives. When derivatives are priced, considering different lending/borrowing rates leads to semi-linear BSDEs and PDEs, and thus it is necessary to solve the equations numerically. However, once it can be gua…
Junbeom Lee, Chao Zhou
arXiv · arXiv · 2019
In this paper, the Kyle model of insider trading is extended by characterizing the trading volume with long memory and allowing the noise trading volatility to follow a general stochastic process. Under this newly revised model, the equilibrium conditions are determined, with which the optimal insider trading strategy, price impact and price volatility are obtained explicitly. The volatility of the price volatility a…
Ben-zhang Yang, Xinjiang He, Nan-jing Huang
arXiv · arXiv · 2026
Automated market makers (AMMs) for prediction markets descend from market scoring rules, where a mechanism operator subsidizes a market to aggregate beliefs about uncertain events. The existing literature has focused on bounding the total worst-case loss to the subsidizer, but has not addressed how that loss is distributed across price states or over time. We use the framework of loss-versus-rebalancing (LVR) to stud…
Ciamac C. Moallemi, Dan Robinson, Brian Zhu
arXiv · arXiv · 2026
This paper argues that AI-agent alignment in markets should not be understood only as a property of agents, but also as a property of the interaction infrastructure in which agents act. In financial markets, this infrastructure is the market core: the rule system that determines how orders enter, interact, match, persist, and stabilize. If this fundamental interaction layer allows or rewards undesired behaviour, then…
Omar Inverso, Emilio Tuosto, Dragisa Zunic
arXiv · arXiv · 2026
This paper develops a structural framework for characterizing the informational feasibility of financial markets under heterogeneous institutional and geopolitical conditions. Departing from the assumption of uniform and time-invariant market efficiency, adaptive efficiency is conceptualized as a localized and state-dependent property emerging from the interaction between economic scale, institutional enforcement, an…
Roberto Garrone
arXiv · arXiv · 2025
Risk allocation, the decomposition of a portfolio-wide risk measure into component contributions, is a fundamental problem in financial risk management due to the non-additive nature of risk measures, the layered organizational structures of financial institutions, and the range of possible allocation strategies characterized by different rationales and properties. In this work, we conduct a systematic review of the …
Marco Scaringi, Marco Bianchetti
arXiv · arXiv · 2025
Stablecoins promise par convertibility, yet issuers must balance immediate liquidity against yield on reserves to keep the peg credible. We study this treasury problem as a continuous-time control task with two instruments: reallocating reserves between cash and short-duration government bills, and setting a spread fee for either minting or burning the coin. Mint and redemption flows follow mutually exciting processe…
Alexander Hammerl