Related papers: A Modern Approach to the Efficient-Market Hypothes…
We consider the scenario where $N$ utilities strategically bid for electricity in the day-ahead market and balance the mismatch between the committed supply and actual demand in the real-time market, with uncertainty in demand and local…
In decision-dependent games, multiple players optimize their decisions under a data distribution that shifts with their joint actions, creating complex dynamics in applications like market pricing. A practical consequence of these dynamics…
In a Markovian model for a financial market, we characterize the best arbitrage with respect to the market portfolio that can be achieved using nonanticipative investment strategies, in terms of the smallest positive solution to a parabolic…
A financial market is called "diverse" if no single stock is ever allowed to dominate the entire market in terms of relative capitalization. In the context of the standard Ito-process model initiated by Samuelson (1965) we formulate this…
Arbitrage is one important revenue source for energy storage in electricity markets. However, a large amount of storage in the market will impact the energy price and reduce potential revenues. This can lead to strategic behaviors of…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
This study examines whether the efficiency of cryptocurrency markets (Bitcoin and Ethereum) evolve over time based on Lo's (2004) adaptive market hypothesis (AMH). In particular, we measure the degree of market efficiency using a…
We study the welfare effects of overreaction to information in the form of diagnostic expectations in markets with asymmetric information, and the effect of a simple intervention in the form of a tax or a subsidy. A large enough level of…
The seminal impossibility result of Myerson and Satterthwaite (1983) states that for bilateral trade, there is no mechanism that is individually rational (IR), incentive compatible (IC), weakly budget balanced, and efficient. This has led…
The efficient market hypothesis has far-reaching implications for financial trading and market stability. Whether or not cryptocurrencies are informationally efficient has therefore been the subject of intense recent investigation. Here, we…
The notion that economies should normally be in equilibrium is by now well-established; equally well-established is that economies are almost never precisely in equilibrium. Using a very general formulation, we show that under dynamics that…
First, we give an asymptotic expansion of short-dated at-the-money implied volatility that refines the preceding works and proves in particular that non-rough volatility models are inconsistent to a power law of volatility skew. Second, we…
Polymarket is a prediction market platform where users can speculate on future events by trading shares tied to specific outcomes, known as conditions. Each market is associated with a set of one or more such conditions. To ensure proper…
We investigate the possibility of completing financial markets in a model with no exogenous probability measure and market imperfections. A necessary and sufficient condition is obtained for such extension to be possible.
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…
We consider in a market model the cooperative emergence of value due to a positive feedback between perception of needs and demand. Here we consider also a negative feedback from production of the traded products, and find that this…
We propose a notion of fairness for allocation problems in which different agents may have different reservation utilities, stemming from different outside options, or property rights. Fairness is usually understood as the absence of envy,…
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…
Many fairness criteria constrain the policy or choice of predictors, which can have unwanted consequences, in particular, when optimizing the policy under such constraints. Here, we advocate to instead focus on the utility function the…
We investigate knowledge exchange among commercial organisations, the rationale behind it and its effects on the market. Knowledge exchange is known to be beneficial for industry, but in order to explain it, authors have used high level…