Related papers: Elasticity theory of structuring
Statistics is sometimes described as the science of reasoning under uncertainty. Statistical models provide one view of this uncertainty, but what is frequently neglected is the 'invisible' portion of uncertainty: that assumed not to exist…
Compositional Game Theory is a new, recently introduced model of economic games based upon the computer science idea of compositionality. In it, complex and irregular games can be built up from smaller and simpler games, and the equilibria…
The Minority Game is a generic model of competing adaptive agents, which is often believed to be a model of financial markets. We discuss to which extend this is a reasonable statement, and present minimal modifications that make this model…
This paper studies a risk-sensitive decision-making problem under uncertainty. It considers a decision-making process that unfolds over a fixed number of stages, in which a decision-maker chooses among multiple alternatives, some of which…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
The desirable gambles framework provides a foundational approach to imprecise probability theory but relies heavily on linear utility assumptions. This paper introduces function-coherent gambles, a generalization that accommodates…
We develop methods to formally describe and compare games, in order to probe questions of game structure and design, and as a stepping stone to predicting player behavior from design patterns. We define a grammar-like formalism to describe…
The game theory techniques are used to find the equilibrium of a market. Game theory refers to the ways in which strategic interactions among economic agents produce outcomes with respect to the preferences (or utilities) of those agents,…
The aggregation of conflicting preferences is a central problem in multiagent systems. The key difficulty is that the agents may report their preferences insincerely. Mechanism design is the art of designing the rules of the game so that…
This overview paper defends an augmented cognitively oriented generic-design hypothesis: there are both significant similarities between the design activities implemented in different situations and crucial differences between these and…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
The aggregation of conflicting preferences is a central problem in multiagent systems. The key difficulty is that the agents may report their preferences insincerely. Mechanism design is the art of designing the rules of the game so that…
This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…
No matter how much some gamblers occasionally win, as long as they continue to gamble, sooner or later they will lose more to the casino, which is the so-called long bet will lose. Our results demonstrate the counter-intuitive phenomenon,…
This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
EBIs/ESOs substantially change the traditional production/service function because ESOs/EBIs can have different psychological effects(motivation or de-motivation), and can create intangible capital and different economic payoffs. Although…
We present a dynamical many-body theory of money in which the value of money is a time dependent ``strategic variable'' that is chosen by the individual agents. The value of money in equilibrium is not fixed by the equations, and thus…
Game theory provides a mathematical framework for analysing strategic situations involving at least two players. Normal-form games model situations where the players simultaneously pick their moves. In this thesis we explore the strategic…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…