This paper derives arbitrage trading strategies taking into account the fact that the actions of arbitrageurs impact prices. This avoids the difficulty of having to rely on exogenous position limits to prevent infinite arbitrage profits. When arbitrageurs are financially constrained their...

This paper develops a theory of strategic trading in markets with large influential arbitrageurs. If arbitrageurs are not very well-capitalized, margin requirements or capital constraints make their trades predictable. Other market participants can exploit this by trading against them....

This paper presents a simple manipulation that (i) reduces the two numerical integrations needed to compute option prices using fourier inversion into a single numerical integration and (ii) reduces the number of characteristic function evaluations needed to obtain a given level of accuracy. The...