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We study the optimal execution of market and limit orders with permanent and temporary price impacts as well as uncertainty in the filling of limit orders. Our continuous-time model incorporates a trade speed limiter and a trader director…
We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
To study the assumption that the utility maximization hypothesis implicitly adds to consumer theory, we consider a mathematical representation of pre-marginal revolution consumer theory based on subjective exchange ratios. We introduce two…
In the large financial market, which is described by a model with countably many traded assets, we formulate the problem of the expected utility maximization. Assuming that the preferences of an economic agent are modeled with a stochastic…
In the study of economic networks, econometric approaches interpret the traditional Gravity Model specification as the expected link weight coming from a probability distribution whose functional form can be chosen arbitrarily, while…
This work lies in the fusion of experimental economics and data mining. It continues author's previous work on mining behaviour rules of human subjects from experimental data, where game-theoretic predictions partially fail to work.…
We investigate brokerage between traders from an online learning perspective. At any round $t$, two traders arrive with their private valuations, and the broker proposes a trading price. Unlike other bilateral trade problems already studied…
In this article the problem of reconstructing the pattern of connection between agents from partial empirical data in a macro-economic model is addressed, given a set of behavioral equations. This systemic point of view puts the focus on…
We study an optimal execution problem in illiquid markets with both instantaneous and persistent price impact and stochastic resilience when only absolutely continuous trading strategies are admissible. In our model the value function can…
We present a simple dynamic equilibrium model for an online exchange where both buyers and sellers arrive according to a exogenously defined stochastic process. The structure of this exchange is motivated by the limit order book mechanism…
We consider a sequential decision-making setting where, at every round $t$, a market maker posts a bid price $B_t$ and an ask price $A_t$ to an incoming trader (the taker) with a private valuation for one unit of some asset. If the trader's…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and…
The Glosten-Milgrom model describes a single asset market, where informed traders interact with a market maker, in the presence of noise traders. We derive an analogy between this financial model and a Szil\'ard information engine by {\em…
Maximum entropy reinforcement learning motivates agents to explore states and actions to maximize the entropy of some distribution, typically by providing additional intrinsic rewards proportional to that entropy function. In this paper, we…
The principle of maximum entropy is a broadly applicable technique for computing a distribution with the least amount of information possible constrained to match empirical data, for instance, feature expectations. We seek to generalize…