Related papers: Sufficiency on the Stock Market
Observations on the past provide some hints about what will happen in the future, and this can be quantified using information theory. The ``predictive information'' defined in this way has connections to measures of complexity that have…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
We study optimal portfolio choice models in markets with partial information about the stock's drift. We solve the single agent problem for general utilities using a new approach that yields regularity of the value function and closed form…
In a very simple stock market, made by only two \emph{initially equivalent} traders, we discuss how the information can affect the performance of the traders. More in detail, we first consider how the portfolios of the traders evolve in…
We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
We apply the theory of McKean-Vlasov-type SDEs to study several problems related to market efficiency in the context of partial information and partially observable financial markets: (i) convergence of reduced-information market price…
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…
The benefits of portfolio diversification is a central tenet implicit to modern financial theory and practice. Linked to diversification is the notion of breadth. Breadth is correctly thought of as the number of in- dependent bets available…
An agent acquires information dynamically until her belief about a binary state reaches an upper or lower threshold. She can choose any signal process subject to a constraint on the rate of entropy reduction. Strategies are ordered by "time…
We consider an investor who, while maximizing his/her expected utility, also compares the outcome to a reference entity. We recall the notion of personal equilibrium and show that, in a multistep, generically incomplete financial market…
Financial and gambling markets are ostensibly similar and hence strategies from one could potentially be applied to the other. Financial markets have been extensively studied, resulting in numerous theorems and models, while gambling…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
In this work a relation between a measure of short-term arbitrage in the market and the excess growth of portfolios as a notion of long-term arbitrage is established. The former originates from "Geometric Arbitrage Theory" and the latter…
A financial market comprising of a certain number of distinct companies is considered, and the following statement is proved: either a specific agent will surely beat the whole market unconditionally in the long run, or (and this "or" is…
We consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal…
The paper treats the financial market as a communication system, using four information-theoretic assumptions to derive an idealized model with only one parameter. State variables are scalar stationary diffusions. The model minimizes the…
In deep reinforcement learning, policy optimization methods need to deal with issues such as function approximation and the reuse of off-policy data. Standard policy gradient methods do not handle off-policy data well, leading to premature…
Relational models for contingency tables are generalizations of log-linear models, allowing effects associated with arbitrary subsets of cells in a possibly incomplete table, and not necessarily containing the overall effect. In this…
The war of attrition with two-sided asymmetric information is a foundational model in political economy, yet it generically admits a continuum of perfect Bayesian equilibria. This paper characterizes the sources of equilibrium multiplicity.…