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The static two price economy of conic finance is first employed to
define capital, profit, and subsequently return and leverage. Examples
illustrate how profits are negative on claims taking exposure to loss
and positive on claims taking gain exposure. It is argued that though
markets do not have preferences or objectives of their own, competitive
pressures lead markets to become capital minimizers or leverage
maximizers. Yet within a static context one observes that hedging
strategies must then depart from delta hedging and incorporate gamma
adjustments. Finally these ideas are generalized to a dynamic context
where for dynamic conic finance, the bid and ask price sequences are
seen as nonlinear expectation operators associated with the solution of
particular backward stochastic difference equations (BSDE) solved in
discrete time at particular tenors leading to tenor specific or
equivalently liquidity contingent pricing. The drivers of the associated
BSDEs are exhibited in complete detail.