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Volatility-induced financial growth

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  • Michael A. H. Dempster
  • Igor V. Evstigneev
  • Klaus R. Schenk-hoppe

Abstract

We show that the volatility of a price process, which is usually regarded as an impediment to financial growth, can serve as an endogenous factor in its acceleration.

Suggested Citation

  • Michael A. H. Dempster & Igor V. Evstigneev & Klaus R. Schenk-hoppe, 2007. "Volatility-induced financial growth," Quantitative Finance, Taylor & Francis Journals, vol. 7(2), pages 151-160.
    • Handle: RePEc:taf:quantf:v:7:y:2007:i:2:p:151-160
    DOI: 10.1080/14697680601103268
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    5. Y.M. Kabanov, 1999. "Hedging and liquidation under transaction costs in currency markets," Finance and Stochastics, Springer, vol. 3(2), pages 237-248.
    6. Igor Evstigneev & Dhruv Kapoor, 2009. "Arbitrage in stationary markets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 32(1), pages 5-12, May.
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    10. Dries Darius & Aytac Ilhan & John Mulvey & Koray Simsek & Ronnie Sircar, 2002. "Trend-following hedge funds and multi-period asset allocation," Quantitative Finance, Taylor & Francis Journals, vol. 2(5), pages 354-361.
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    Cited by:

    1. Soumik Pal & Ting-Kam Leonard Wong, 2013. "Energy, entropy, and arbitrage," Papers 1308.5376, arXiv.org, revised Jan 2016.
    2. Jan Hendrik Witte, 2015. "Volatility Harvesting: Extracting Return from Randomness," Papers 1508.05241, arXiv.org, revised Nov 2015.
    3. Diana Barro & Elio Canestrelli & Fabio Lanza, 2014. "Volatility vs. downside risk: optimally protecting against drawdowns and maintaining portfolio performance," Working Papers 2014:18, Department of Economics, University of Venice "Ca' Foscari".
    4. Radu Tunaru, 2015. "Model Risk in Financial Markets:From Financial Engineering to Risk Management," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 9524, December.
    5. Igor Evstigneev & Dhruv Kapoor, 2009. "Arbitrage in stationary markets," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 32(1), pages 5-12, May.
    6. M. A. H. Dempster & E. A. Germano & M. Medova & M. I. Rietbergen & F. Sandrini & M. Scrowston & N. Zhang, 2007. "DC pension fund benchmarking with fixed-mix portfolio optimization," Quantitative Finance, Taylor & Francis Journals, vol. 7(4), pages 365-370.
    7. Sergei Belkov & Igor V. Evstigneev & Thorsten Hens, 2020. "An evolutionary finance model with a risk-free asset," Annals of Finance, Springer, vol. 16(4), pages 593-607, December.
    8. Keith Cuthbertson & Simon Hayley & Nick Motson & Dirk Nitzsche, 2016. "What Does Rebalancing Really Achieve?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 21(3), pages 224-240, July.
    9. Mikhail Zhitlukhin, 2020. "Asymptotic minimization of expected time to reach a large wealth level in an asset market game," Papers 2007.04909, arXiv.org.
    10. Diana Barro & Elio Canestrelli & Giorgio Consigli, 2019. "Volatility versus downside risk: performance protection in dynamic portfolio strategies," Computational Management Science, Springer, vol. 16(3), pages 433-479, July.
    11. E. Babaei & I.V. Evstigneev & K.R. Schenk-Hoppé & M.V. Zhitlukhin, 2018. "Von Neumann-Gale Dynamics and Capital Growth in Financial Markets with Frictions," Economics Discussion Paper Series 1815, Economics, The University of Manchester.
    12. Barro, Diana & Consigli, Giorgio & Varun, Vivek, 2022. "A stochastic programming model for dynamic portfolio management with financial derivatives," Journal of Banking & Finance, Elsevier, vol. 140(C).

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