Related papers: Multi-outcome and Multidimensional Market Scoring …
When machine learning is outsourced to a rational agent, conflicts of interest might arise and severely impact predictive performance. In this work, we propose a theoretical framework for incentive-aware delegation of machine learning…
Betting markets are gaining in popularity. Mean beliefs generally differ from prices in prediction markets. Logarithmic utility is employed to study the risk and return adjustments to prices. Some consequences are described. A modified…
Traders and investors involved in an option contract having the underlying stock in range bound are likely to lose their initial investment. Timing in buying an option contract is of capital importance. In a recent article [1] the…
We study gains from trade in multi-dimensional two-sided markets. Specifically, we focus on a setting with $n$ heterogeneous items, where each item is owned by a different seller $i$, and there is a constrained-additive buyer with…
It is a common misconception that in order to make consistent profits as a trader, one needs to posses some extra information leading to an asset value estimation more accurate than that reflected by the current market price. While the idea…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
We study the problem of finding the optimal bidding strategy for an advertiser in a multi-platform auction setting. The competition on a platform is captured by a value and a cost function, mapping bidding strategies to value and cost…
This paper studies the design of optimal proper scoring rules when the principal has partial knowledge of an agent's signal distribution. Recent work characterizes the proper scoring rules that maximize the increase of an agent's payoff…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
The design of data markets has gained importance as firms increasingly use machine learning models fueled by externally acquired training data. A key consideration is the externalities firms face when data, though inherently freely…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
We analyze sources of error in prediction market forecasts in order to bound the difference between a security's price and the ground truth it estimates. We consider cost-function-based prediction markets in which an automated market maker…
The problem of allocating scarce items to individuals is an important practical question in market design. An increasingly popular set of mechanisms for this task uses the concept of market equilibrium: individuals report their preferences,…
This work suggests modifications to a previously introduced class of heterogeneous agent models that allow for the inclusion of different types of agent motivations and behaviours in a unified way. The agents operate within a highly…
We present a model of price formation in an inelastic market whose dynamics are partially driven by both money flows and their impact on asset prices. The money flow to the market is viewed as an investment policy of outside investors. For…
Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…
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…
According to the fundamental theorems of welfare economics, any competitive equilibrium is Pareto efficient. Unfortunately, competitive equilibrium prices only exist under strong assumptions such as perfectly divisible goods and convex…
We consider a prediction market in which all aspects are controlled by market forces, in particular the correct outcomes of events are decided by the market itself rather than by trusted arbiters. This kind of a decentralized prediction…