Related papers: Information-based models for finance and insurance
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…
Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…
Predictive statistical mechanics is a form of inference from available data, without additional assumptions, for predicting reproducible phenomena. By applying it to systems with Hamiltonian dynamics, a problem of predicting the macroscopic…
An agent acquires information dynamically until her belief about a binary state reaches an upper or lower threshold. She can choose any signal process subject to a constraint on the rate of entropy reduction. Strategies are ordered by "time…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
Binary data are highly common in many applications, however it is usually modelled with the assumption that the data are independently and identically distributed. This is typically not the case in many real-world examples and such the…
In this work we propose a statistical approach to handling sources of theoretical uncertainty in string theory models of inflation. By viewing a model of inflation as a probabilistic graph, we show that there is an inevitable information…
We study a continuous time economy where throughout time, insiders receive private signals regarding the risky assets' terminal payoff. We prove existence of a partial communication equilibrium where, at each private signal time, the public…
In competitive industries, a reliable yield forecasting is a prime factor to accurately determine the production costs and therefore ensure profitability. Indeed, quantifying the risks long before the effective manufacturing process enables…
We investigate the impact of available information on the estimation of the default probability within a generalized structural model for credit risk. The traditional structural model where default is triggered when the value of the firm's…
Information in the form of data, which can be stored and transferred between users, can be viewed as an intangible commodity, which can be traded in exchange for money. Determining the fair price at which a string of data should be traded…
This paper is part of an ongoing investigation of "pragmatic information", defined in Weinberger (2002) as "the amount of information actually used in making a decision". Because a study of information rates led to the Noiseless and Noisy…
In the previous papers (Kui\'{c} et al. in Found Phys 42:319-339, 2012; Kui\'{c} in arXiv:1506.02622, 2015), it was demonstrated that applying the principle of maximum information entropy by maximizing the conditional information entropy,…
This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the…
We represent the functioning of the housing market and study the relation between income segregation, income inequality and house prices by introducing a spatial Agent-Based Model (ABM). Differently from traditional models in urban…
This paper aims at designing the different important components of a semi-closed simulated stock market (pricing mechanism, stock allocation and news generation). The purpose is to understand the interactions of the different aspects within…
We introduce an event based framework of directional changes and overshoots to map continuous financial data into the so-called Intrinsic Network - a state based discretisation of intrinsically dissected time series. Defining a method for…
We propose a formulation to construct new classes of financial price processes based on the insight that the key variable driving prices $P$ is the earning-over-price ratio $\gamma \simeq 1/P$, which we refer to as the earning yield and is…