Related papers: A Computational View of Market Efficiency
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
Energy market designs with non-merchant storage have been proposed in recent years, with the aim of achieving optimal market integration of storage. In order to handle the time-linking constraints that are introduced in such markets,…
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…
Since the 1960s, the question whether markets are efficient or not is controversially discussed. One reason for the difficulty to overcome the controversy is the lack of a universal, but also precise, quantitative definition of efficiency…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
Equilibrium computation in markets usually considers settings where player valuation functions are known. We consider the setting where player valuations are unknown; using a PAC learning-theoretic framework, we analyze some classes of…
Large scale electricity storage is set to play an increasingly important role in the management of future energy networks. A major aspect of the economics of such projects is captured in arbitrage, i.e. buying electricity when it is cheap…
In a discrete-time financial market model with instantaneous price impact, we find an asymptotically optimal strategy for an investor maximizing her expected wealth. The asset price is assumed to follow a process with negative memory. We…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…
I prove that if markets are weak-form efficient, meaning current prices fully reflect all information available in past prices, then P = NP, meaning every computational problem whose solution can be verified in polynomial time can also be…
Researchers have long proposed using economic approaches to resource allocation in computer systems. However, few of these proposals became operational, let alone commercial. Questions persist about the economic approach regarding its…
Machine learning models play a key role for service providers looking to gain market share in consumer markets. However, traditional learning approaches do not take into account the existence of additional providers, who compete with each…
Market making is one of the most important aspects of algorithmic trading, and it has been studied quite extensively from a theoretical point of view. The practical implementation of so-called "optimal strategies" however suffers from the…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…