Related papers: Prospect Theory for Online Financial Trading
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Risk aversion is a common behavior universal to humans and animals alike. Economists have traditionally defined risk preferences by the curvature of the utility function. Psychologists and behavioral economists also make use of concepts…
This paper considers for the first time pursuit-evasion (PE) differential games with irrational perceptions of both pursuer and evader on probabilistic characteristics of environmental uncertainty. Firstly, the irrational perceptions of…
We investigate brokerage between traders from an online learning perspective. At any round $t$, two traders arrive with their private valuations, and the broker proposes a trading price. Unlike other bilateral trade problems already studied…
Financial market forecasting remains a formidable challenge despite the surge in computational capabilities and machine learning advancements. While numerous studies have underscored the precision of computer-generated market predictions,…
Human behavior is a dynamic process that evolves with experience. Understanding the evolution of individual's risk propensity is critical to design public health interventions to propitiate the adoption of better biosecurity protocols and…
We solve exactly a simple model of trend following strategy, and obtain the analytical shape of the profit per trade distribution. This distribution is non trivial and has an option like, asymmetric structure. The degree of asymmetry…
It is critical to understand and model the behavior of individuals in a pandemic, as well as identify effective ways to guide people's behavior in order to better control the epidemic spread. However, current research fails to account for…
We study the role of contextual information in the online learning problem of brokerage between traders. In this sequential problem, at each time step, two traders arrive with secret valuations about an asset they wish to trade. The learner…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
The inputs and preferences of human users are important considerations in situations where these users interact with autonomous cyber or cyber-physical systems. In these scenarios, one is often interested in aligning behaviors of the system…
This paper develops a model of reference-dependent assessment of subjective beliefs in which loss-averse people optimally choose the expectation as the reference point to balance the current felicity from the optimistic anticipation and the…
Financial markets across all asset classes are known to exhibit trends. These trends have been exploited by traders for decades. Here, we empirically measure when trends revert, based on 30 years of daily futures prices for equity indices,…
We consider a game-theoretic model where individuals compete over a shared failure-prone system or resource. We investigate the effectiveness of a taxation mechanism in controlling the utilization of the resource at the Nash equilibrium…
There is a sudden surge to model human behavior due to its vast and diverse applications which includes modeling public policies, economic behavior and consumer behavior. Most of the human behavior itself can be modeled into a choice…
We consider a stochastic game-theoretic model of an investment market in continuous time with short-lived assets and study strategies, called survival, which guarantee that the relative wealth of an investor who uses such a strategy remains…
Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance…
We propose a prediction model based on the minority game in which traders continuously evaluate a complete set of trading strategies with different memory lengths using the strategies' past performance. Based on the chosen trading strategy…
What return should you expect when you take on a given amount of risk? How should that return depend upon other people's behavior? What principles can you use to answer these questions? In this paper, we approach these topics by exploring…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…