Related papers: Robust framework for quantifying the value of info…
A platform charges a producer for disclosing quality evidence to consumers before trade. It aims to maximize its revenue guarantee across potentially multiple equilibria which arise from the interdependence of producer purchase decisions…
Abstract In this work, we build two environments, namely the modified QLBS and RLOP models, from a mathematics perspective which enables RL methods in option pricing through replicating by portfolio. We implement the environment…
We present a simple agent-based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism, and vice versa. Our agents invest…
Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into conditions on the latter…
Suppose a decision maker wants to predict weather tomorrow by eliciting and aggregating information from crowd. How can the decision maker incentivize the crowds to report their information truthfully? Many truthful peer prediction…
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
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…
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…
Derivatives, as a critical class of financial instruments, isolate and trade the price attributes of risk assets such as stocks, commodities, and indices, aiding risk management and enhancing market efficiency. However, traditional hedging…
We develop a hierarchical Bayesian dynamic game for competitive inventory and pricing under incomplete information. Two firms repeatedly choose order quantities and prices while facing two layers of uncertainty: unknown market demand and…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…
Firms that price perishable resources -- airline seats, hotel rooms, seasonal inventory -- now routinely use demand predictions, but these predictions vary widely in quality. Under hard capacity constraints, acting on an inaccurate…
This work introduces a framework for quantifying the information content of logical propositions through the use of implication hypergraphs. We posit that a proposition's informativeness is primarily determined by its relationships with…
We present an approach, based on deep neural networks, that allows identifying robust statistical arbitrage strategies in financial markets. Robust statistical arbitrage strategies refer to trading strategies that enable profitable trading…