Related papers: Free Lunch
We reconsider the microeconomic foundations of financial economics. Motivated by the importance of Knightian Uncertainty in markets, we present a model that does not carry any probabilistic structure ex ante, yet is based on a common order.…
Multitask learning and related frameworks have achieved tremendous success in modern applications. In multitask learning problem, we are given a set of heterogeneous datasets collected from related source tasks and hope to enhance the…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
The random utility model, a cornerstone in economics, is axiomatized by Falmagne (1978) and McFadden and Richter (1990) with the assumption that if a menu is observable, the choice frequencies of all alternatives are also observable.…
In this work it is shown that scale free tails in metabolic flux distributions inferred from realistic large scale models can be simply an artefact due to reactions involved in thermodynamically unfeasible cycles, that are unbounded by…
Prediction-Powered Inference (PPI) is a popular strategy for combining gold-standard and possibly noisy pseudo-labels to perform statistical estimation. Prior work has shown an asymptotic "free lunch" for PPI++, an adaptive form of PPI,…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
Asset price bubbles are situations where asset prices exceed the fundamental values defined by the present value of dividends. This paper presents a conceptually new perspective: the necessity of bubbles. We establish the Bubble Necessity…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
We show that strategies implemented in automatic theorem proving involve an interesting tradeoff between execution speed, proving speedup/computational time and usefulness of information. We advance formal definitions for these concepts by…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
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…
When uncertainty is modelled by a set of non-dominated and non-compact probability measures, a notion of essential supremum for a family of real-valued functions is developed in terms of upper semi-analytic functions. We show how the…
Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…
In a financial market with a continuous price process and proportional transaction costs we investigate the problem of utility maximization of terminal wealth. We give sufficient conditions for the existence of a shadow price process,…
Although the valuation of life contingent assets has been thoroughly investigated under the framework of mathematical statistics, little financial economics research pays attention to the pricing of these assets in a non-arbitrage, complete…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
General Equilibrium Theory is the benchmark of economics, especially its results concerning the efficient allocation of resources, known as the First and Second Welfare Theorems. Yet, General Equilibrium Theory is beyond the scope of most…