Related papers: Prospect Theory for Online Financial Trading
Online portfolio selection is a fundamental problem in computational finance, which has been extensively studied across several research communities, including finance, statistics, artificial intelligence, machine learning, and data mining,…
We present a deep long short-term memory (LSTM)-based neural network for predicting asset prices, together with a successful trading strategy for generating profits based on the model's predictions. Our work is motivated by the fact that…
Entering the 5G/6G era, the core concept of human-centric communications has intensified the search effort into analytical frameworks for integrating technological and non-technological domains. Among non-technological domains, human…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
In evaluating prediction markets (and other crowd-prediction mechanisms), investigators have repeatedly observed a so-called "wisdom of crowds" effect, which roughly says that the average of participants performs much better than the…
Risk and utility functionals are fundamental building blocks in economics and finance. In this paper we investigate under which conditions a risk or utility functional is sensitive to the accumulation of losses in the sense that any…
Are cryptocurrency traders driven by a desire to invest in a new asset class to diversify their portfolio or are they merely seeking to increase their levels of risk? To answer this question, we use individual-level brokerage data and study…
Debt aversion can have severe adverse effects on financial decision-making. We propose a model of debt aversion, and design an experiment involving real debt and saving contracts, to elicit and jointly estimate debt aversion with…
Online alignment (e.g., GRPO) is generally more performant than offline alignment (e.g., DPO) -- but why? Drawing on prospect theory from behavioral economics, we propose a human-centric explanation. We prove that online on-policy sampling…
Financial markets are influenced by human behavior that deviates from rationality due to cognitive biases. Traditional reinforcement learning (RL) models for financial decision-making assume rational agents, potentially overlooking the…
Prediction markets aggregate agents' beliefs regarding a future event, where each agent is paid based on the accuracy of its reported belief when compared to the realized outcome. Agents may strategically manipulate the market (e.g., delay…
We propose a model of two-way selection system. It appears in the processes like choosing a mate between men and women, making contracts between job hunters and recruiters, and trading between buyers and sellers. In this paper, we propose a…
eCommerce transaction frauds keep changing rapidly. This is the major issue that prevents eCommerce merchants having a robust machine learning model for fraudulent transactions detection. The root cause of this problem is that rapid…
This paper presents an agent based model of an electronic market with two types of trading agents. One type follows a mean reverting strategy and the other, the speculative trader, tracks the maximum realised return over recent trades. The…
We consider the problem of Adverse Selection and optimal derivative design within a Principal-Agent framework. The principal's income is exposed to non-hedgeable risk factors arising, for instance, from weather or climate phenomena. She…
Online reviews are feedback voluntarily posted by consumers about their consumption experiences. This feedback indicates customer attitudes such as affection, awareness and faith towards a brand or a firm and demonstrates inherent…
The most commonly accepted model for investors' preferences is expected utility theory. More recently, other theories have emerged and pose new challenges to mathematics. The present paper treats preferences of cumulative prospect theory…
We use a series of pre-registered, incentive-compatible online experiments to investigate how people evaluate and choose among different waiting time distributions. Our main findings are threefold. First, consistent with prior literature,…
The unpredictability and volatility of the stock market render it challenging to make a substantial profit using any generalised scheme. Many previous studies tried different techniques to build a machine learning model, which can make a…