Arbitrage (finance) | EPFL Graph Search

L'arbitrage est une opération financière destinée à assurer un gain positif ou nul de manière certaine en profitant d'écarts temporaires de prix constatés entre différents titres ou contrats. Par exemple en prenant position simultanément et en sens contraire soit sur plusieurs actifs dérivés différents soit sur un produit dérivé et son actif sous-jacent. Il consiste essentiellement :

soit à vendre un actif financier et acheter un autre, correspondant mieux au prix actuel du marché et, dans les perspectives actuelles, à ce que recherche l'investisseur en matière de rendement et de risque acceptable ;
soit à vendre et à acheter un même actif financier, mais sur deux marchés différents (par exemple la bourse de New York et celle de Paris), entre lesquels une différence de prix susceptible de dégager un gain monétaire est constatée.

Les arbitragistes sont des professionnels constamment à l'affût des opportunités que présentent ces différences de prix. Leur rôle contribue à lisser/ef

Three Essays on Asset Pricing

Emmanuel Leclercq

In the first chapter,which is a joint work with Mathieu Cambou and Philippe H.A. Charmoy, we study the distribution of the hedging errors of a European call option for the delta and variance-minimizing strategies. Considering the setting proposed by Heston (1993), we assess the error distribution by computing its moments under the real-world probability measure. It turns out that one is better off implementing either a delta hedging or a variance-minimizing strategy, depending on the strike and maturity of the option under consideration. In the second paper, which is a joint work with Damir Filipovic and Loriano Mancini, we develop a practicable continuous-time dynamic arbitrage-free model for the pricing of European contingent claims. Using the framework introduced by Carmona and Nadtochiy (2011, 2012), the stock price is modeled as a semi-martingale process and, at each time t , the marginal distribution of the European option prices is coded by an auxiliary process that starts at t and follows an exponential additive process. The jump intensity that characterizes these auxiliary processes is then set in motion by means of stochastic dynamics of Itô's type. The model is a modification of the one proposed by Carmona and Nadtochiy, as only finitely many jump sizes are assumed. This crucial assumption implies that the jump intensities are taken values in only a finitedimensional space. In this setup, explicit necessary and sufficient consistency conditions that guarantee the absence of arbitrage are provided. A practicable dynamic model verifying them is proposed and estimated, using options on the S&P 500. Finally, the hedging of variance swap contracts is considered. It is shown that under certain conditions, a variance-minimizing hedging portfolio gives lower hedging errors on average, compared to a model-free hedging strategy. In the third and last chapter, which is a joint work with Rémy Praz, we concentrate on the commodity markets and try to understand the impact of financiers on the hedging decisions. We look at the changes in the spot price, variance, production and hedging choices of both producers and financiers, when the mass of financiers in the economy increases. We develop an equilibrium model of commodity spot and futures markets in which commodity production, consumption, and speculation are endogenously determined. Financiers facilitate hedging by the commodity suppliers. The entry of new financiers thus increases the supply of the commodity and decreases the expected spot prices, to the benefits of the end-users. However, this entry may be detrimental to the producers, as they do not internalize the price reduction due to greater aggregate supply. In the presence of asymmetric information, speculation on the futures market serves as a learning device. The futures price and open interest reveal different pieces of private information regarding the supply and demand side of the spot market, respectively. When the accuracy of private information is low, the entry of new financiers makes both production and spot prices more volatile. The entry of new financiers typically increases the correlation between financial and commodity markets.

EPFL2014

Asset pricing with arbitrage activity

Julien Hugonnier

We study an economy populated by three groups of myopic agents: constrained agents subject to a portfolio constraint that limits their risk taking, unconstrained agents subject to a standard nonnegative wealth constraint, and arbitrageurs with access to a credit facility. Such credit is valuable as it allows arbitrageurs to exploit the limited arbitrage opportunities that emerge endogenously in reaction to the demand imbalance generated by the portfolio constraint The model is solved in closed-form, and we show that, in contrast to existing models with frictions and logarithmic agents, arbitrage activity has an impact on the price level and generates both excess volatility and the leverage effect We show that these results are due to the fact that arbitrageurs amplify fundamental shocks by levering up in good times and deleveraging in bad times. (c) 2014 Elsevier B.V. All rights reserved.

Elsevier2015

Arbitraging Intraday Wholesale Energy Market Prices With Aggregations of Thermostatic Loads

John Lygeros

We investigate the potential for aggregations of residential thermostatically controlled loads (TCLs), such as air conditioners, to arbitrage intraday wholesale electricity market prices via non-disruptive load control. We present two arbitrage approaches: 1) a benchmark that gives us an optimal policy but requires local computation or real-time communication and 2) an alternative based on a thermal energy storage model, which relies on less computation/communication infrastructure, but is suboptimal. We find that the alternative approach achieves around 60%-80% of the optimal wholesale energy cost savings. We use this approach to compute practical upper bounds for savings via arbitrage with air conditioners in California's intraday energy market. We investigate six sites over four years and find that the savings range from 2−37 per TCL per year, and depend upon outdoor temperature statistics and price volatility.

2015

Three Essays on Asset Pricing

Emmanuel Leclercq

EPFL2014