Related papers: Stochastic discount factors
This paper is an original attempt to understand the foundations of economic reasoning. It endeavors to rigorously define the relationship between subjective interpretations and objective valuations of such interpretations in the context of…
A possibly immortal agent tries to maximise its summed discounted rewards over time, where discounting is used to avoid infinite utilities and encourage the agent to value current rewards more than future ones. Some commonly used discount…
Economies and societal structures in general are complex stochastic systems which may not lend themselves well to algebraic analysis. An addition of subjective value criteria to the mechanics of interacting agents will further complicate…
Discounting is an important dimension in multi-agent systems as long as we want to reason about strategies and time. It is a key aspect in economics as it captures the intuition that the far-away future is not as important as the near…
It is well known that reinforcement learning can be cast as inference in an appropriate probabilistic model. However, this commonly involves introducing a distribution over agent trajectories with probabilities proportional to exponentiated…
We uncover a new anomaly in asset pricing that is linked to the remuneration: the more a company spends on salaries and benefits per employee, the better its stock performs, on average. Moreover, the companies adopting similar remuneration…
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
Agents that learn to select optimal actions represent a prominent focus of the sequential decision-making literature. In the face of a complex environment or constraints on time and resources, however, aiming to synthesize such an optimal…
Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data.…
A decision maker repeatedly chooses one of a finite set of actions. In each period, the decision maker's payoff depends on fixed basic payoff of the chosen action and the frequency with which the action has been chosen in the past. We…
Game theory serves as a powerful tool for distributed optimization in multi-agent systems in different applications. In this paper we consider multi-agent systems that can be modeled by means of potential games whose potential function…
We study how to optimally design selection mechanisms, accounting for agents' investment incentives. A principal wishes to allocate a resource of homogeneous quality to a heterogeneous population of agents. The principal commits to a…
Economic theory has provided an estimable intuition in understanding the perplexing ideologies in law, in the areas of economic law, tort law, contract law, procedural law and many others. Most legal systems require the parties involved in…
We study the instrumental value of conceptual knowledge when making statistical decisions. Such knowledge tells agents how unknown, payoff-relevant states relate. It is distinct from the statistical knowledge gained from observing signals…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
The appropriate discount rate for evaluating policies is a critical consideration in economic decision-making. This paper presents a new model for calculating the derived discount rate for a society that includes different groups with…