Related papers: Free Lunch
This paper quantifies the interplay between the non-arbitrage notion of No-Unbounded-Profit-with-Bounded-Risk (NUPBR hereafter) and additional information generated by a random time. This study complements the one of…
We characterize absence of arbitrage with simple trading strategies in a discounted market with a constant bond and several risky assets. We show that if there is a simple arbitrage, then there is a 0-admissible one or an obvious one, that…
Classical countably additive real-valued probabilities come at a philosophical cost: in many infinite situations, they assign the same probability value -- namely, zero -- to cases that are impossible as well as to cases that are possible.…
Many software systems offer configuration options to tailor their functionality and non-functional properties (e.g., performance). Often, users are interested in the (performance-)optimal configuration, but struggle to find it, due to…
We provide a formal framework accounting for a widespread idea in the theory of economic design: analytically established incompatibilities between given axioms should be qualified by the likelihood of their violation. We define the degree…
Likelihood-free inference refers to inference when a likelihood function cannot be explicitly evaluated, which is often the case for models based on simulators. Most of the literature is based on sample-based `Approximate Bayesian…
We present a broad agenda for meaningful banking regulation reform aiming the creation of evolutive competitive environment to maximize the effectiveness of international financial system through the introduction of fair competition process…
This paper supplies two possible resolutions of Fortune's (2000) margin-loan pricing puzzle. Fortune (2000) noted that the margin loan interest rates charged by stock brokers are very high in relation to the actual (low) credit risk and the…
In this note, a non-commutative analogue of the fundamental theorem of asset pricing in mathematical finance is proved.
The paper proposes a new type of negation in multi-valued logics, providing a different way to answer the following question: what does it mean that some object language formula does not have a given truth-value. Along the way, the paper…
Do completely unpredictable events exist in nature? Classical theory, being fully deterministic, completely excludes fundamental randomness. On the contrary, quantum theory allows for randomness within its axiomatic structure. Yet, the fact…
Without probability theory, we define classes of supermartingales, martingales, and semimartingales in idealized financial markets with continuous price paths. This allows us to establish probability-free versions of a number of standard…
A new definition of events of game-theoretic probability zero in continuous time is proposed and used to prove results suggesting that trading in financial markets results in the emergence of properties usually associated with randomness.…
This paper considers the notion of possible events which are insignificant in probabilistic analysis (i.e. events that have zero probability). The paper discusses the method of modal logic based on "possible worlds" and discusses a…
Here we introduce the idea of using rational expectations, a core concept in economics and finance, as a tool to predict the optimal failure time for a wide class of weighted k-out-of-n reliability systems. We illustrate the concept by…
We introduce a financial market model featuring a risky asset whose price follows a sticky geometric Brownian motion and a riskless asset that grows with a constant interest rate $r\in \mathbb R $. We prove that this model satisfies No…
Two markets should be considered isomorphic if they are financially indistinguishable. We define a notion of isomorphism for financial markets in both discrete and continuous time. We then seek to identify the distinct isomorphism classes,…
An explicit formula is derived for the value of weak information in a discrete time model that works for a wide range of utility functions including the logarithmic and power utility. We assume a complete market with a finite number of…
An agent acquires a costly flexible signal before making a decision. We explore to what degree knowledge of the agent's information costs helps predict her behavior. We establish an impossibility result: learning costs alone generate no…
The notion that an independent central bank reduces a country's inflation is a controversial hypothesis. To date, it has not been possible to satisfactorily answer this question because the complex macroeconomic structure that gives rise to…