Related papers: Prospect Theory for Online Financial Trading

We consider in detail an investment strategy, titled "The Bounce Basket", designed for someone to express a bullish view on the market by allowing them to take long positions on securities that would benefit the most from a rally in the…

Learning is a process which can update decision rules, based on past experience, such that future performance improves. Traditionally, machine learning is often evaluated under the assumption that the future will be identical to the past in…

Cumulative prospect theory (CPT) is the first theory for decision-making under uncertainty that combines full theoretical soundness and empirically realistic features [P.P. Wakker - Prospect theory: For risk and ambiguity, Page 2]. While…

Existing observational approaches for learning human preferences, such as inverse reinforcement learning, usually make strong assumptions about the observability of the human's environment. However, in reality, people make many important…

We propose a dynamic network model where two mechanisms control the probability of a link between two nodes: (i) the existence or absence of this link in the past, and (ii) node-specific latent variables (dynamic fitnesses) describing the…

Price dynamics is analyzed in terms of a model which includes the possibility of effective forces due to trend followers or trend adverse strategies. The method is tested on the data of a minority-majority model and indeed it is capable of…

We derive a closed-form expression capturing the degree of Relative Risk Aversion (RRA) of investors for non-"fair" lotteries. We argue that our formula is superior to earlier methods that have been proposed, as it is a function of only…

We study dynamics of a simulated world with stock and money, driven by the externally given processes which we refer to as sentiments. The considered sentiments influence the buy/sell stock trading attitude, the perceived price uncertainty,…

Online auctions are one of the most fundamental facets of the modern economy and power an industry generating hundreds of billions of dollars a year in revenue. Auction theory has historically focused on the question of designing the best…

The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…

Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered with…

Prospect Theory (PT) models human decision-making behaviour under uncertainty, among which linguistic uncertainty is commonly adopted in real-world scenarios. Although recent studies have developed some frameworks to test PT parameters for…

A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…

We investigate the performance of dynamic portfolios constructed using more than 21,000 technical trading rules on 12 categorical and country-specific markets over the 2004-2015 study period, on rolling forward structures of different…

The unprecedented access offered by the World Wide Web brings with it the potential to gather huge amounts of data on human activities. Here we exploit this by using a toy model of financial markets, the Minority Game (MG), to investigate…

In traditional quantitative trading practice, navigating the complicated and dynamic financial market presents a persistent challenge. Fully capturing various market variables, including long-term information, as well as essential signals…

We are often faced with the non-trivial task of designing incentive mechanisms in the era of Web3. As history has shown, many Web3 services failed mostly due to the lack of a rigorous incentive mechanism design based on token economics.…

A general framework is suggested to describe human decision making in a certain class of experiments performed in a trading laboratory. We are in particular interested in discerning between two different moods, or states of the investors,…

The purpose of this article is to propose a new "theory," the Strategic Analysis of Financial Markets (SAFM) theory, that explains the operation of financial markets using the analytical perspective of an enlightened gambler. The gambler…

We derive a family of risk-sensitive reinforcement learning methods for agents, who face sequential decision-making tasks in uncertain environments. By applying a utility function to the temporal difference (TD) error, nonlinear…