Related papers: Effective risk aversion in thin risk-sharing marke…
Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…
Diversification is the typical investment strategy of risk-averse agents. However, non-diversified positions that allocate all resources to a single asset, state of the world or revenue stream are common too. We show that whenever finitely…
Market trade-routes can support infectious-disease transmission, impacting biological populations and even disrupting causal trade. Epidemiological models increasingly account for reductions in infectious contact, such as risk-aversion…
A new simple model of financial market is proposed, based on the sequential and inter-temporal nature of trader-trader interaction, and on a new simple trading strategy space. In this pattern-based speculation model, the traders open and…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
We investigate the effects of the social interactions of a finite set of agents on an equilibrium pricing mechanism. A derivative written on non-tradable underlyings is introduced to the market and priced in an equilibrium framework by…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
Trading markets represent a real-world financial application to deploy reinforcement learning agents, however, they carry hard fundamental challenges such as high variance and costly exploration. Moreover, markets are inherently a…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
We present a model of predatory traders interacting with each other in the presence of a central reserve (which dissipates their wealth through say, taxation), as well as inflation. This model is examined on a network for the purposes of…
Econophysics provides a strategy for understanding the potential mechanisms underlying the anomalous distribution of wealth found in real societies. We present a computational nonlinear stochastic model for the distribution of wealth that…
Although machine learning tasks are highly sensitive to the quality of input data, relevant datasets can often be challenging for firms to acquire, especially when held privately by a variety of owners. For instance, if these owners are…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
We consider the strategic interaction of traders in a continuous-time financial market with Epstein-Zin-type recursive intertemporal preferences and performance concerns. We derive explicitly an equilibrium for the finite player and the…