Related papers: A Modern Approach to the Efficient-Market Hypothes…
This study proposes a new efficiency requirement, a minimal almost weak Pareto principle, which says that x is socially better than y whenever the only one individual never prefers y to x, and all the others prefers x to y. Then, I show…
In this comment we discuss the problem of reconciling the linear efficiency of price returns with the long-memory of supply and demand. We present new evidence that shows that efficiency is maintained by a liquidity imbalance that co-moves…
This paper focuses on the problem of minimizing the outages due to extreme events on the power grid equitably among all customers of the grid. The paper presents two ways of incorporating fairness into the existing formulations that seek to…
Large scale electricity storage is set to play an increasingly important role in the management of future energy networks. A major aspect of the economics of such projects is captured in arbitrage, i.e. buying electricity when it is cheap…
It is well known that a non-cooperative game may have multiple equilibria. In this paper we consider the efficiency of games, measured by the ratio between the aggregate payoff over all Nash equilibria and that over all admissible controls.…
We propose a simple model that describes the dynamics of efficiencies of competing agents. Agents communicate leading to increase of efficiencies of underachievers, and an efficiency of each agent can increase or decrease irrespectively of…
This paper focuses on the stability of the non-arbitrage condition in discrete time market models when some unknown information $\tau$ is partially/fully incorporated into the market. Our main conclusions are twofold. On the one hand, for a…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
This work addresses the buyer's inspection paradox for information markets. The paradox is that buyers need to access information to determine its value, while sellers need to limit access to prevent theft. To study this, we introduce an…
The present paper shows that it can be advantageous for traders to publish their information on the true value of an asset even if they (i) cannot build a position in the asset prior to the publication of their information and (ii) cannot…
We outline how to create a mechanism that provides an optimal way to elicit, from an arbitrary group of experts, the probability of the truth of an arbitrary logical proposition together with collective information that has an explicit form…
In the context of a general continuous financial market model, we study whether the additional information associated with an honest time gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations,…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
We model real-world data markets, where sellers post fixed prices and buyers are free to purchase from any set of sellers, as a simultaneous game. A key component here is the negative externality buyers induce on one another due to data…
Economies and societal structures in general are complex stochastic systems which may not lend themselves well to algebraic analysis. An addition of subjective value criteria to the mechanics of interacting agents will further complicate…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
When human agents come together to make decisions, it is often the case that one human agent has more information than the other. This phenomenon is called information asymmetry and this distorts the market. Often if one human agent intends…