Related papers: Continuous Equilibrium in Affine and Information-B…
We construct a diffusion approximation of a repeated game in which agents make bets on outcomes of i.i.d. random vectors and their strategies are close to an asymptotically optimal strategy. This model can be interpreted as trading in an…
This article provides the mathematical foundation for stochastically continuous affine processes on the cone of positive semidefinite symmetric matrices. This analysis has been motivated by a large and growing use of matrix-valued affine…
In revenue maximization of selling a digital product in a social network, the utility of an agent is often considered to have two parts: a private valuation, and linearly additive influences from other agents. We study the incomplete…
Prudent management of insurance investment portfolios requires competent asset pricing of fixed-income assets with time-to-event contingent cash flows, such as consumer asset-backed securities (ABS). Current market pricing techniques for…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
We consider a market of risky financial assets whose participants are an informed trader, a representative uninformed trader, and noisy liquidity providers. We prove the existence of a market-clearing equilibrium when the insider…
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
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…
This paper is intended to explain, in simple terms, some of the mechanisms and agents common to multiagent financial market simulations. We first discuss the necessity to include an exogenous price time series ("the fundamental value") for…
No-arbitrage asset pricing characterizes valuation through the existence of equivalent martingale measures relative to a filtration and a class of admissible trading strategies. In practice, pricing is performed across multiple asset…
Agent-based models (ABMs) are fit to model heterogeneous, interacting systems like financial markets. We present the latest advances in Evology: a heterogeneous, empirically calibrated market ecology agent-based model of the US stock…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…
This paper examines a semi-analytical approach for pricing American options in time-inhomogeneous models characterized by negative interest rates (for equity/FX) or negative convenience yields (for commodities/cryptocurrencies). Under such…
We study the power and limitations of posted prices in multi-unit markets, where agents arrive sequentially in an arbitrary order. We prove upper and lower bounds on the largest fraction of the optimal social welfare that can be guaranteed…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
We present a simple model of a non-equilibrium self-organizing market where asset prices are partially driven by investment decisions of a bounded-rational agent. The agent acts in a stochastic market environment driven by various exogenous…