Latency arbitrage and the synchronized placement of orders

We argue that owing to traders’inability to fully express their preferences over the execution times of their orders,contemporary stock market designs are prone to latency arbitrage.In turn,we propose a new order type,which allows traders to specify the time at which their orders are executed after reaching the exchange.Using recent latency data,we demonstrate that the order type proposed here allows traders to synchronize order executions across different exchanges,such that high-frequency traders,even if they operate at the speed of light,can no-longer engage in latency arbitrage.

Massive energy storage system for effective usage of renewable energy

The current energy trend indicates a strong thrust toward transforming renewable energy as a major power source.To achieve this mission,battery energy storage systems(BESSs)are indispensable.Although BESSs are expensive,cost reduction can be achieved by using BESSs for multiple purposes,such as load leveling,business continuity planning,frequency control,capacity market,arbitrage,and emergency power.In this paper,various applications of BESSs are classified.The possibility of achieving conflict-free combination of different applications is demonstrated.The total required energy storage capacity in Japan is estimated to be 150–200 GWh by 2030.The present status of NaS batteries for multipurpose use and new trends in battery-based businesses are introduced.

Stability Analysis of Robust Arbitrage in a Random Interval Valued Financial Market

Stability of robust arbitrage under different probability measures is discussed in a random interval valued financial market.In a fundamental financial market without robust arbitrages, a suitable condition is given to guarantee that the market with new probability measures will also have no robust arbitrage. In order to specify the result got in this article,an example of binomial tree financial model with interval ratios of change is proposed.

Empirical Study on Arbitrage Opportunities in China Copper Futures Market

No-arbitrage bound is established with no-arbitrage theory considering all kinds of trade costs, different deposit and loan interest rate, margin and tax in futures markets. The empirical results find that there are many lower bound arbitrage opportunities in China copper futures market from August 8th, 2003 to August 16th, 2005, Concretely, no-arbitrage opportunity is dominant and lower bound arbitrage is narrow in normal market segment. Lower bound arbitrage almost always exists with huge magnitude in inverted market segment. There is basically no-arbitrage in normal market because spot volume is enough, so that upper or lower bound arbi- trage can be realized, There is mostly lower bound arbitrage in inverted market because spot volume is lack.

NO-ARBITRAGE SYMMETRIES

The no-arbitrage property is widely accepted to be a centerpiece of modern financial mathematics and could be considered to be a financial law applicable to a large class of(idealized) markets.This paper addresses the following basic question:can one characterize the class of transformations that leave the law of no-arbitrage invariant?We provide a geometric formalization of this question in a non probabilistic setting of discrete time-the so-called trajectorial models.The paper then characterizes,in a local sense,the no-arbitrage symmetries and illustrates their meaning with a detailed example.Our context makes the result available to the stochastic setting as a special case.

An Empirical Examination of the Arbitrage Pricing Theory:Evidences from the U.S.Stock Market

This study investigates the effects of changes in local macroeconomic risk factors on returns on the banking,chemicals,insurance,telecommunication,and utilities industries in the U.S.market.Using a multifactor pricing model and data from 1998:01 to 2017:12,empirical results show that the banking,chemical,and telecommunication industries show more differences in their stock reactions to local macroeconomic risk factors.The insurance and telecommunication industries do not react significantly to risk factors.However,all the industries show strong reactions to local market portfolio.

Empirical study of speculation roles in international copper price bubble formation

By using GARCH（1,1）-M and EGARCH（1,1）-M models, the relationships among funds speculation transaction, arbitrage transaction and the fluctuation of international copper future price were studied. The news impact curve of copper future price fluctuation respectively introduced funds speculation position and arbitrage position was given, and the result is consistent with the empirical study conclusion. The results show that investment funds are not the factor that causes copper future price fluctuation, but can reduce the copper future price fluctuation; the copper future price fluctuation is more sensitive to negative information, and ftmd speculative positions can reduce asymmetric effect of copper price fluctuation, while fimds arbitrage position influences less.

Recovery of Foreign Interest Rates from Exchange Binary Options

One of most challenging problems from applying the Black-Scholes model to financial derivatives, is reconciling the deviation between the expected and observed values. This study derives an extension of the Black-Scholes model and recovers the real drift of binary call options from their market prices. For space-dependent real drift, we obtain stable linearization and an integral equation. We also find that using market prices of options with different strike prices enables us to identify the term structure of the real drift. Results demonstrate that our new approach can confirm the existence of arbitrage opportunities in a binary option transaction.

A New Mean Reversion Model of Close-End Fund

On the basis of fractal theory, one of the nonlinear theories, this paper studies the validity of Chinese fund market fractal time sequence through Hurst exponent, calculates the H value and proposes a new close-end fund mean reversion model. Meanwhile, this paper validates the mean reversion time sequence for consecutive 54 week data of fund market. The result indicates that this model can effectively prove that Chinese close-end fund market follows the biased random walk. The research also proves that the fund discount does have mean reversion tendency and averagely the fund with high discount has a higher excess yield than that of the fund with low discount. The mean excess yield and the ratio between discount rate deviation and standard deviation demonstrate a descending relationship. The optimum investment period based on ＂mean reversion＂ is one month. Consequently this model provides a new arbitrage method through the discount of close-end fund.

Corporation Strategic Investment on Behavioral Finance

The traditional DCF approach ignoring the managerial flexibility of the decision makers often underestimates the value of project value. This paper not only takes into account the uncertainty of investment and the irreversibility of the sunk cost, but also takes the competitors＇ erode to the project value into it. Relax the EMH and the rationality of the investor＇s hypothesis, integrate the behavioral finance theory and the game option, and construct the valuing frame based on the behavioral finance and game option theory to make a scientific and effective project decision-making approach.

Back Finance： Financial Derivatives and 2008 Process

First of all, this paper explores monetary perspectives of Keynes and Friedman. Secondly, it explores financial derivative system in global economy. Thirdly, this study explores world money notion of M. Keynes. Keynes presented world money concept in 1944, in Bretton Woods Talk. His notion may be applied through global GDP today. Assumption of this study is that world money may finance debt payment of nations, and it finances balanced payment deficit of economies, because capitalism of modem economy requires money to run business system. Uysal （2016） presented World money Notion and 2008 Process in conference of 1 lth International Silkroad in Tbilisi, Georgia. Uysal （2015, 2016） discussed World Money concept in the conference with assumption that it may increase demand in global economy. This study is based on case study, which is 2008 Global Crise. Because its effect continues worldwide.

International Financial Market＇s Integration and Modelling Returns of Risky Assets

The aim of this paper is to test the ability of conditional and unconditional capital asset pricing models （CAPMs） and to explain emerging markets returns in terms of their integration into the international market. The authors use data on five developed countries and five emerging countries as well as data on the Tunis Stock Exchange （TSE） after the reforms. The results show that the correlations between emerging markets returns and developed markets returns are very low and sometimes negative. Conditional arbitrage pricing theory （APT） as well as conditional CAPM has low predictive power for emerging markets than that for developed markets. Finally, following the financial reforms, Tunisian financial markets have became more and more integrated into the international market （excess returns and unconditional beta consistent with predictions）. However, conditional APT does not accurately explain Tunisian market returns. This study confirms the unavailability of an accurate modelling technique of the TSE structure.

Are Securities Also Derivatives?

This paper has used the Arbitrage Theorem (Gordan Theorem) to show that first, all securities are derivatives for each other, and they are priced by the same risk neutral probability measure. Second, after the firm changes its debt-equity ratio, the equityholders can always combine the new equity with other existing securities to create a home-made equity which will give exactly the same time-1 payoff of the old equity. That is, we have a capital structure irrelevancy proposition: changes in firms’ debt-equity ratios will not affect equityholders’ wealth (welfare), and equityholders’ preferences toward variance are irrelevant. Third, when the firm moves from a more certain project to a more uncertain one, the time-0 price of equity will increase, but (because the time-1 payoff of common bond has an upper bound) the time-0 price of common bond will decrease. Fourth, different labor contractual arrangements will not affect the time-0 price of labor input. When the firm moves from a more certain project to a more uncertain one, the time-0 price of labor input will increase if it is under the share or the mixed contract.

EXISTENCE OF STOCHASTIC EQUILIBRIUM WITH INCOMPLETE FINANCIAL MARKETS

This paper analyzes the aritrage free security markets and the general equilibrium existence problem for a stochastic economy with incomplete financial markets. Information structure is given by an event tree. This paper restricts attention to purely financial securities. It is assume that trading takes place in the sequence of spot markets and futures markets for securities payable in units of account. Unlimited short selling in securities is allowed. Financial markets may be incomplete: some consumption streams may be impossible to obtain by any trading strategy. Securities may be individually precluded from trade at arbitrary states and dates. The security price process is arbitrage free the dividend process if and only if there exists a stochstic state price (present value) process: the present value of the security prices at every vertex is the present value of their dividend and capital values over the set of immediate successors; the current value of each security at every vertex is the present value of its future dividend stream over all succeeding vertices. The existence of such an equilibrium is proved under the following condition: continuous, weakly convex, strictly monotone and complete preferences, strictly positive endowments and dividends processes.

Structural Stability of the Financial Market Model: Continuity of Superhedging Price and Model Approximation

The present paper continues the topic of our recent paper in the same journal,aiming to show the role of structural stability in financial modeling.In the context of financial market modeling,structural stability means that a specific“no-arbitrage”property is unaffected by small(with respect to the Pompeiu–Hausdorff metric)perturbations of the model’s dynamics.We formulate,based on our economic interpretation,a new requirement concerning“no arbitrage”properties,which we call the“uncertainty principle”.This principle in the case of no-trading constraints is equivalent to structural stability.We demonstrate that structural stability is essential for a correct model approximation(which is used in our numerical method for superhedging price computation).We also show that structural stability is important for the continuity of superhedging prices and discuss the sufficient conditions for this continuity.

Multi-objective Optimization of Production Scheduling Using Particle Swarm Optimization Algorithm for Hybrid Renewable Power Plants with Battery Energy Storage System

Considering the increasing integration of renewable energies into the power grid,batteries are expected to play a key role in the challenge of compensating the stochastic and intermittent nature of these energy sources.Besides,the deployment of batteries can increase the benefits of a renewable power plant.One way to increase the profits with batteries studied in this paper is performing energy arbitrage.This strategy is based on storing energy at low electricity price moments and selling it when electricity price is high.In this paper,a hybrid renewable energy system consisting of wind and solar power with batteries is studied,and an optimization process is conducted in order to maximize the benefits regarding the dayahead production scheduling of the plant.A multi-objective cost function is proposed,which,on the one hand,maximizes the obtained profit,and,on the other hand,reduces the loss of value of the battery.A particle swarm optimization algorithm is developed and fitted in order to solve this non-linear multi-objective function.With the aim of analyzing the importance of considering both the energy efficiency of the battery and its loss of value,two more simplified cost functions are proposed.Results show the importance of including the energy efficiency in the cost function to optimize.Besides,it is proven that the battery lifetime increases substantially by using the multi-objective cost function,whereas the profitability is similar to the one obtained in case the loss of value is not considered.Finally,due to the small difference in price among hours in the analyzed Iberian electricity market,it is observed that low profits can be provided to the plant by using batteries just for arbitrage purposes in the day-ahead market.

Do Arbitragers Exploit the January Effect？

The January effect has been well documented since the 1970s. This study examines whether the January effect still exists and if it does, whether arbitrageurs exploit it. We find that the January effect is still persistently significant. Furthermore, we find that arbitrageurs appear to exploit the January effect, especially in good market years when the number of losing firms is limited and are therefore more easily identifiable. We also find that the January effect tends to be higher for losing stocks with high arbitrage costs relative to those with low arbitrage costs.

Arbitrage-free pricing of derivatives in nonlinear market models

The objective of this paper is to provide a comprehensive study of the no-arbitrage pricing of financial derivatives in the presence of funding costs,the counterparty credit risk and market frictions affecting the trading mechanism,such as collateralization and capital requirements.To achieve our goals,we extend in sev-eral respects the nonlinear pricing approach developed in(El Karoui and Quenez 1997)and(El Karoui et al.1997),which was subsequently continued in(Bielecki and Rutkowski 2015).

The regulatory arbitrage and window dressing in shadow banking:the example of Chinese wealth management product

We document that in China the maturity dates of bank-issued wealth management products(WMPs)cluster toward the end of a month and then decrease significantly at the beginning of the following month.Our empirical work detects a negative relationship between a bank’s loan-to-deposit ratio(LDR)at month-ends and the number of its issued WMPs expiring within several days of the month-end.Moreover,this WMP clustering and the negative relationship disappear after the reform in which regulators bring up measures for banks with a high deposit deviation degree in 2014.We also document that the banks tend to arrange the high-return WMPs to expire around month-ends to attract customers,and this clustering of high-return WMPs also disappears after the reform.Our findings suggest that banks actively,rather than passively,use WMPs as vehicles for their regulatory arbitrage or window dressing behaviours.

No more free lunch:The increasing popularity of machine learning and financial market efficiency

In this paper,we show that the increasing popularity of machine learning improves market efficiency.By analysing the performance of a set of popular machine learning-based investment strategies,we find that profits from these strategies experience significant declines since the wide adoption of machine learning techniques,especially for profits based on the more preferred method of neural networks.These declines mainly come from long legs.Using the‘machine learning’Google search index as a proxy for machine learning-based trading intensity,we find that returns from the neural networks-based long–short and long-only strategies are weaker following high levels of machine learning intensity,while no relation is found between machine learning intensity and the short-only neural networks-based strategy.