Related papers: Free Lunch
The concept of fitness is introduced, and a simple derivation of the Fundamental Theorem of Natural Selection (which states that the average fitness of a population increases if its variance is nonzero) is given. After a short discussion of…
Decision-theoretic planning with risk-sensitive planning objectives is important for building autonomous agents or decision-support systems for real-world applications. However, this line of research has been largely ignored in the…
Many economic theory models incorporate finiteness assumptions that, while introduced for simplicity, play a real role in the analysis. We provide a principled framework for scaling results from such models by removing these finiteness…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
Compound interest as well as inflation grows exponentially with time, whereas other means to repay debt grow polynomially. For this and other, mostly political, reasons, debt without inflation is unsustainable. We suggest a discontinuous…
We propose a class of discrete-time stochastic models for the pricing of inflation-linked assets. The paper begins with an axiomatic scheme for asset pricing and interest rate theory in a discrete-time setting. The first axiom introduces a…
This article presents methods for estimating extreme probabilities, beyond the range of the observations. These methods are model-free and applicable to almost any sample size. They are grounded in order statistics theory and have a wide…
We theorize the financial health of a company and the risk of its default. A company is financially healthy as long as its equilibrium in the financial system is maintained, which depends on the cost attributable to the probability that…
A common assumption of political economy is that profit rates across firms or sectors tend to uniformity, and often models are formulated in which this tendency is assumed to have been realised. But in reality this tendency is never…
Humans can generate reasonable answers to novel queries (Schulz, 2012): if I asked you what kind of food you want to eat for lunch, you would respond with a food, not a time. The thought that one would respond "After 4pm" to "What would you…
The article presents a translation of some widespread financial terminology into the language of decision theory. For instance, financial leverage can be regarded as an object of choice or a decision. We show how the optics of decision…
Although the ``scale-free'' literature is large and growing, it gives neither a precise definition of scale-free graphs nor rigorous proofs of many of their claimed properties. In fact, it is easily shown that the existing theory has many…
We study several questions in the reliable agnostic learning framework of Kalai et al. (2009), which captures learning tasks in which one type of error is costlier than others. A positive reliable classifier is one that makes no false…
We study a well-known technique of using absoluteness for giving choice-free proofs to some statements which are known to be provable with the axiom of choice. The idea is to reduce the problem to an inner model where the axiom of choice…
The following measures against unemployment are proposed: In the short term, to promote greater income for the poorest sectors. It is shown that this can be paid with the resulting increased production, without losing income to the other…
Put-call parity is a terminal-payoff identity; quoted residuals against traded futures are near zero. Yet enforcing parity is path-dependent, exposing arbitrageurs to daily settlement, margin, and finite capital. Using minute-level NBBO…
This paper deals with applications of coherent risk measures to pricing in incomplete markets. Namely, we study the No Good Deals pricing technique based on coherent risk. Two forms of this technique are presented: one defines a good deal…
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…
This article is a prologue to the article "Why Markets are Inefficient: A Gambling 'Theory' of Financial Markets for Practitioners and Theorists." It presents important background for that article --- why gambling is important, even…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…