Related papers: Stochastic discount factors
Rate change calculations in the literature involve deterministic methods that measure the change in premium for a given policy. The definition of rate change as a statistical parameter is proposed to address the stochastic nature of the…
Winners-take-all situations introduce an incentive for agents to diversify their behavior, since doing so will result in splitting an eventual price with fewer people. At the same time, when the payoff of a process depends on a parameter…
Reinforcement learning (RL) agents have traditionally been tasked with maximizing the value function of a Markov decision process (MDP), either in continuous settings, with fixed discount factor $\gamma < 1$, or in episodic settings, with…
We apply the knockoff procedure to factor selection in finance. By building fake but realistic factors, this procedure makes it possible to control the fraction of false discovery in a given set of factors. To show its versatility, we apply…
Methods for learning optimal policies in autonomous agents often assume that the way the domain is conceptualised---its possible states and actions and their causal structure---is known in advance and does not change during learning. This…
We study a simple problem of allocating common-value goods. The designer seeks to allocate the goods to as many unit-demand agents as possible without monetary transfers, while agents, who possess partial private information about the…
In this paper, we consider the revealed preferences problem from a learning perspective. Every day, a price vector and a budget is drawn from an unknown distribution, and a rational agent buys his most preferred bundle according to some…
This paper closely examines theoretical and practical aspects of the widely used discounted cash flows (DCF) valuation method. It assesses its potentials as well as several weaknesses. A special emphasize is being put on the valuation of…
Algorithms are often used to produce decision-making rules that classify or evaluate individuals. When these individuals have incentives to be classified a certain way, they may behave strategically to influence their outcomes. We develop a…
In constructing an econometric or statistical model, we pick relevant features or variables from many candidates. A coalitional game is set up to study the selection problem where the players are the candidates and the payoff function is a…
The collateral choice option gives the collateral posting party the opportunity to switch between different collateral currencies which is well-known to impact the asset price. Quantification of the option's value is of practical importance…
An important question in economics is how people choose between different payments in the future. The classical normative model predicts that a decision maker discounts a later payment relative to an earlier one by an exponential function…
The policy gradient theorem describes the gradient of the expected discounted return with respect to an agent's policy parameters. However, most policy gradient methods drop the discount factor from the state distribution and therefore do…
Searching for new effective risk factors on stock returns is an important research topic in asset pricing. Factor modeling is an active research topic in statistics and econometrics, with many new advances. However, these new methods have…
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 have shown, in a series of articles, that a classical description of a large number of economic agents can be replaced by a statistical fields formalism. To better understand the accumulation and allocation of capital among different…
This paper investigates how the discount factor and payoff functions can be identified in stationary infinite-horizon dynamic discrete choice models. In single-agent models, we show that common nonparametric assumptions on per-period…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
In economics, there are many ways to describe the interaction between a "seller" and a "buyer". The most common one, with which we interact almost every day, is selling for a fixed price. This option is perfect for selling a mass product,…
We present a novel model for capturing the behavior of an agent exhibiting sunk-cost bias in a stochastic environment. Agents exhibiting sunk-cost bias take into account the effort they have already spent on an endeavor when they evaluate…