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Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
We study the ex-ante minimization of market inefficiency, defined in terms of minimum deviation of market prices from fundamental values, from a centralized planner's perspective. Prices are pressured from exogenous trading actions of…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…
A non-Bayesian time-varying model is developed by introducing the concept of the degree of market efficiency that varies over time. This model may be seen as a reflection of the idea that continuous technological progress alters the trading…
Existing theoretical models of evolution focus on the relative fitness advantages of different mutants in a population while the dynamic behavior of the population size is mostly left unconsidered. We here present a generic stochastic model…
The stock market is a crucial component of the financial market, playing a vital role in wealth accumulation for investors, financing costs for listed companies, and the stable development of the national macroeconomy. Significant…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
In this paper, we use the generalized Hurst exponent approach to study the multi- scaling behavior of different financial time series. We show that this approach is robust and powerful in detecting different types of multiscaling. We…
This paper deals with a fundamental subject that has seldom been addressed in recent years, that of market impact in the options market. Our analysis is based on a proprietary database of metaorders-large orders that are split into smaller…
We present a stylized model with feedback loops for the evolution of a population's wealth over generations. Individuals have both talent and wealth: talent is a random variable distributed identically for everyone, but wealth is a random…
The quality of governance of institutions, corporations and countries depends on the ability of efficient decision making within the respective boards or cabinets. Opinion formation processes within groups are size dependent. It is often…
Company mergers and acquisitions are often perceived to act as catalysts for corporate growth in free markets systems: it is conventional wisdom that those activities lead to better and more efficient markets. However, the broad adoption of…
We relook at the classic equity fund selection and portfolio construction problems from a new perspective and propose an easy-to-implement framework to tackle the problem in practical investment. Rather than the conventional way by…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
The numeraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numeraire portfolio depends on market characteristics, which…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
We propose a simple model that describes the dynamics of efficiencies of competing agents. Agents communicate leading to increase of efficiencies of underachievers, and an efficiency of each agent can increase or decrease irrespectively of…
Financial volatility obeys two fascinating empirical regularities that apply to various assets, on various markets, and on various time scales: it is fat-tailed (more precisely power-law distributed) and it tends to be clustered in time.…