Related papers: Game-Theoretic Capital Asset Pricing in Continuous…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
In this short note I apply the methodology of game-theoretic probability to calculating non-asymptotic confidence intervals for the coefficient of a simple first order scalar autoregressive model. The most distinctive feature of the…
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…
Assume (1) asset returns follow a stochastic multi-factor process with time-varying conditional expectations; (2) investments are linear functions of factors. This paper calculates asymptotic joint moments of the logarithm of investor's…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We propose a prediction model based on the minority game in which traders continuously evaluate a complete set of trading strategies with different memory lengths using the strategies' past performance. Based on the chosen trading strategy…
We propose a Fundamental Theorem of Asset Pricing and a Super-Replication Theorem in a model-independent framework. We prove these theorems in the setting of finite, discrete time and a market consisting of a risky asset S as well as…
We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in…
We introduce predictable relative forward performance processes (PRFPP) as a new framework for studying portfolio management within a competitive and incomplete market environment. Each agent trades a distinct stock following a binomial…
The efficient market hypothesis considers all available information already reflected in asset prices and limits the possibility of consistently achieving above-average returns by trading on publicly available data. We analyzed low…
In this article, inspired by Shi, et al. we investigate the optimal portfolio selection with one risk-free asset and one risky asset in a multiple period setting under cumulative prospect theory (CPT). Compared with their study, our novelty…
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…
This paper reports the effort of using agent-based mix-game model to predict financial time series. It introduces simple generic algorithm into the prediction methodology, and gives an example of its application to forecasting Shanghai…
A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is…
This paper considers the problem of constructing a confidence sequence, which is a sequence of confidence intervals that hold uniformly over time, for estimating the mean of bounded real-valued random processes. This paper revisits the…
Priced timed games are two-player zero-sum games played on priced timed automata (whose locations and transitions are labeled by weights modelling the cost of spending time in a state and executing an action, respectively). The goals of the…
We consider game theory from the perspective of quantum algorithms. Strategies in classical game theory are either pure (deterministic) or mixed (probabilistic). We introduce these basic ideas in the context of a simple example, closely…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…