Related papers: Stochastic discount factors
We present our approach to the problem of how an agent, within an economic Multi-Agent System, can determine when it should behave strategically (i.e. learn and use models of other agents), and when it should act as a simple price-taker. We…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
We consider a repeated auction where the buyer's utility for an item depends on the time that elapsed since his last purchase. We present an algorithm to build the optimal bidding policy, and then, because optimal might be impractical, we…
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…
An indivisible object may be sold to one of $n$ agents who know their valuations of the object. The seller would like to use a revenue-maximizing mechanism but her knowledge of the valuations' distribution is scarce: she knows only the…
In contextual dynamic pricing, a seller sequentially prices goods based on contextual information. Buyers will purchase products only if the prices are below their valuations. The goal of the seller is to design a pricing strategy that…
Strategic classification studies the problem where self-interested individuals or agents manipulate their response to obtain favorable decision outcomes made by classifiers, typically turning to dishonest actions when they are less costly…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
We analyze 18 quadrillion models for the joint pricing of corporate bond and stock returns. Strikingly, we find that equity and nontradable factors alone suffice to explain corporate bond risk premia once their Treasury term structure risk…
Online auctions are one of the most fundamental facets of the modern economy and power an industry generating hundreds of billions of dollars a year in revenue. Auction theory has historically focused on the question of designing the best…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
We propose a payoff function extending Minority Games (MG) that captures the competition between agents to make money. In constrast with previous MG, the best strategies are not always targeting the minority but are shifting…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
This note provides upper bounds on the number of operations required to compute by value iterations a nearly optimal policy for an infinite-horizon discounted Markov decision process with a finite number of states and actions. For a given…
Market-based mechanisms such as auctions are being studied as an appropriate means for resource allocation in distributed and mulitagent decision problems. When agents value resources in combination rather than in isolation, they must often…
Financial asset markets are sociotechnical systems whose constituent agents are subject to evolutionary pressure as unprofitable agents exit the marketplace and more profitable agents continue to trade assets. Using a population of evolving…
Present bias, the tendency to overvalue immediate rewards while undervaluing future ones, is a well-known barrier to achieving long-term goals. As artificial intelligence and behavioral economics increasingly focus on this phenomenon, the…