2026-09-23T22:19:33Zhttps://dspace.mit.edu/server/oai/requestoai:dspace.mit.edu:1721.1/902332022-01-13T07:54:52Zcom_1721.1_7582com_1721.1_7581col_1721.1_131023
Hui Chen.
Beunardeau, Roland
Sloan School of Management.
Sloan School of Management
2014-09-19T21:47:36Z
2014-09-19T21:47:36Z
2014
2014
http://hdl.handle.net/1721.1/90233
890376008
Thesis: S.M. in Management Studies, Massachusetts Institute of Technology, Sloan School of Management, 2014.
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 164-165).
I propose a discrete time model of financial markets in which an arbitrageur has investment opportunities but faces a number of financial constraints. Investment opportunities arise when the price discrepancy between a pair of similar assets becomes large enough. I propose an innovative way to model the effects of market liquidity and the arbitrage industry's reversion force on a stochastic price discrepancy. I use empirical studies and common literature assumptions to build and calibrate the model. I then run a set of Monte-Carlo simulations to test the model's response to the risks and returns of a number of arbitrage strategies in varying economic conditions. The model's results are in line with a number of theories in the existing literature, and specifically confirm the role of the arbitrageur as a liquidity provider in disturbed market environments.
by Roland Beunardeau.
S.M. in Management Studies
170 pages
eng
Massachusetts Institute of Technology
M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.
http://dspace.mit.edu/handle/1721.1/7582
Sloan School of Management.
Risks And returns Of fixed income arbitrage strategies in varying economic environments : a model based on empirical considerations
Thesis
application/pdf
Publication
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unknown
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<Abstract>I propose a discrete time model of financial markets in which an arbitrageur has investment opportunities but faces a number of financial constraints. Investment opportunities arise when the price discrepancy between a pair of similar assets becomes large enough. I propose an innovative way to model the effects of market liquidity and the arbitrage industry's reversion force on a stochastic price discrepancy. I use empirical studies and common literature assumptions to build and calibrate the model. I then run a set of Monte-Carlo simulations to test the model's response to the risks and returns of a number of arbitrage strategies in varying economic conditions. The model's results are in line with a number of theories in the existing literature, and specifically confirm the role of the arbitrageur as a liquidity provider in disturbed market environments.</Abstract>
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