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This paper develops a theory of strategic trading in markets with large arbitrageurs. If arbitrageurs are not well capitalized, capital constraints make their trades predictable. Other market participants can exploit this by trading against them. Competitors may find it optimal to lend to...
Persistent link: https://www.econbiz.de/10005296027
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....
Persistent link: https://www.econbiz.de/10005328933
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....
Persistent link: https://www.econbiz.de/10005329029
Persistent link: https://www.econbiz.de/10005376584
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...
Persistent link: https://www.econbiz.de/10005136768
This paper obtains equilibrium interest rate option prices for discontinuous short-term interest rate processes. The prices are first obtained for a general distribution of jump sizes using a process with a number of fixed size jumps. The pricing formulas are then used to obtain option prices...
Persistent link: https://www.econbiz.de/10005139012
Persistent link: https://www.econbiz.de/10005499730
This paper examines three alternative approaches to valuing real options: (1) the standard option pricing technique using "risk-neutral" probabilities; (2) the use of risk-adjusted discount rates; and (3) discounting certainty-equivalent values with a riskless discount rate. As suggested by the...
Persistent link: https://www.econbiz.de/10005523305
This article presents a new approach to financial risk management whose primary objective is to ensure that companies have sufficient internal funds and access to outside capital to carry out their strategic investments. The foundation of this approach is a comprehensive measure of corporate...
Persistent link: https://www.econbiz.de/10005523341
Persistent link: https://www.econbiz.de/10005531537