Related papers: Robust Financial Bubbles
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
Establishing unambiguously the existence of speculative bubbles is an on-going controversy complicated by the need of defining a model of fundamental prices. Here, we present a novel empirical method which bypasses all the difficulties of…
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this…
We study robust mechanisms to sell a common-value good. We assume that the mechanism designer knows the prior distribution of the buyers' common value but is unsure of the buyers' information structure about the common value. We use linear…
Economic periods and financial crises have highlighted the importance of evaluating financial markets to investors and researchers in recent decades.
The possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random…
Recently, the notion of cryptocurrencies has come to the fore of public interest. These assets that exist only in electronic form, with no underlying value, offer the owners some protection from tracking or seizure by government or…
In most cases, insurance contracts are linked to the financial markets, such as through interest rates or equity-linked insurance products. To motivate an evaluation rule in these hybrid markets, Artzner et al. (2022) introduced the notion…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
As we show using the notion of equilibrium in the theory of infinite sequential games, bubbles and escalations are rational for economic and environmental agents, who believe in an infinite world. This goes against a vision of a self…
This paper studies the design of mechanisms that are robust to misspecification. We introduce a novel notion of robustness that connects a variety of disparate approaches and study its implications in a wide class of mechanism design…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…
Financial crises are a recurrent phenomenon with important effects on the real economy. The financial system is inherently fragile and it is therefore of great importance to be able to measure and characterize its systemic stability.…
In this paper, we investigate the robust models for $\Lambda$-quantiles with partial information regarding the loss distribution, where $\Lambda$-quantiles extend the classical quantiles by replacing the fixed probability level with a…
We utilize quantum superposition principle to establish the improvable upper and lower bounds on the stronger uncertainty relation, i.e., the "weighted-like" sum of the variances of observables. Our bounds include some free parameters which…
Problem definition: Traditional monopoly pricing assumes sellers have full information about consumer valuations. We consider monopoly pricing under limited information, where a seller only knows the mean, variance and support of the…
In this paper, a quantum model for the binomial market in finance is proposed. We show that its risk-neutral world exhibits an intriguing structure as a disk in the unit ball of ${\bf R}^3,$ whose radius is a function of the risk-free…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
Constrained reinforcement learning is to maximize the expected reward subject to constraints on utilities/costs. However, the training environment may not be the same as the test one, due to, e.g., modeling error, adversarial attack,…
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…