Related papers: Getting rich quick with the Axiom of Choice
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
Prospect theory is widely viewed as the best available descriptive model of how people evaluate risk in experimental settings. According to prospect theory, people are risk-averse with respect to gains and risk-seeking with respect to…
We consider a manufacturing plant that purchases raw materials for product assembly and then sells the final products to customers. There are M types of raw materials and K types of products, and each product uses a certain subset of raw…
Although the valuation of life contingent assets has been thoroughly investigated under the framework of mathematical statistics, little financial economics research pays attention to the pricing of these assets in a non-arbitrage, complete…
We construct a model of an exchange economy in which agents trade assets contingent on an observable signal, the probability of which depends on public opinion. The agents in our model are replaced occasionally and each person updates…
The usual theory of asset pricing in finance assumes that the financial strategies, i.e. the quantity of risky assets to invest, are real-valued so that they are not integer-valued in general, see the Black and Scholes model for instance.…
In the committee voting setting, a subset of $k$ alternatives is selected based on the preferences of voters. In this paper, our goal is to efficiently compute $\textit{ex-ante}$ fair probability distributions over committees. We introduce…
An equation for the evolution of the distribution of wealth in a population of economic agents making binary transactions with a constant total amount of "money" has recently been proposed by one of us (RLR). This equation takes the form of…
This paper investigates the consumption and investment decisions of an individual facing uncertain lifespan and stochastic labor income within a Black-Scholes market framework. A key aspect of our study involves the agent's option to choose…
We study a stochastic multiplicative system composed of finite asynchronous elements to describe the wealth evolution in financial markets. We find that the wealth fluctuations or returns of this system can be described by a walk with…
We study option prices in financial markets where the risky asset prices are modelled by jump diffusions. It was proposed by Schweizer (1996) in a general semimartingale setting, following earlier works by F\"ollmer and Sondermann (1986)…
We construct a diffusion approximation of a repeated game in which agents make bets on outcomes of i.i.d. random vectors and their strategies are close to an asymptotically optimal strategy. This model can be interpreted as trading in an…
In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his…
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…
Herbert Simon's classic rich-get-richer model is one of the simplest empirically supported mechanisms capable of generating heavy-tail size distributions for complex systems. Simon argued analytically that a population of flavored elements…
We consider a trader who wants to direct his portfolio towards a set of acceptable wealths given by a convex risk measure. We propose a black-box algorithm, whose inputs are the joint law of stock prices and the convex risk measure, and…
We study the problem of selling a resource through an auction mechanism. The winning buyer in turn develops this resource to generate profit. Two forms of payment are considered: charging the winning buyer a one-time payment, or an initial…
Starting from a Markov chain with a finite alphabet, we consider the chain obtained when all but one symbol are undistinguishable for the practitioner. We study necessary and sufficient conditions for this chain to have continuous…
Transfinite set theory including the axiom of choice supplies the following basic theorems: (1) Mappings between infinite sets can always be completed, such that at least one of the sets is exhausted. (2) The real numbers can be well…