Related papers: The value of informational arbitrage
A well-intentioned principal provides information to a rationally inattentive agent without internalizing the agent's cost of processing information. Whatever information the principal makes available, the agent may choose to ignore some.…
We consider utility maximization problem for semi-martingale models depending on a random factor $\xi$. We reduce initial maximization problem to the conditional one, given $\xi=u$, which we solve using dual approach. For HARA utilities we…
We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
There is a growing trend regarding perceiving personal data as a commodity. Existing studies have built frameworks and theories about how to determine an arbitrage-free price of a given query according to the privacy loss quantified by…
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability ${\cal P}^*$ for the stock's price at time $T$…
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
Firms strategically disclose product information in order to attract consumers, but recipients often find it costly to process all of it, especially when products have complex features. We study a model of competitive information disclosure…
This study extends Blackwell's (1953) comparison of information to a sequential social learning model, where agents make decisions sequentially based on both private signals and the observed actions of others. In this context, we introduce…
The emergent behavior of a distributed system is conditioned by the information available to the local decision-makers. Therefore, one may expect that providing decision-makers with more information will improve system performance; in this…
We study the optimal asset allocation problem for a fund manager whose compensation depends on the performance of her portfolio with respect to a benchmark. The objective of the manager is to maximise the expected utility of her final…
This paper studies a communication game between an uninformed decision maker and two perfectly informed senders with conflicting interests. Senders can misreport information at a cost that increases with the size of the misrepresentation.…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
We present information value, a measure which quantifies the predictability of an utterance relative to a set of plausible alternatives. We introduce a method to obtain interpretable estimates of information value using neural text…
We introduce a class of financial contracts involving several parties by extending the notion of a two-person game option (see Kifer (2000)) to a contract in which an arbitrary number of parties is involved and each of them is allowed to…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
Institutions and investors face the constant challenge of making accurate decisions and predictions regarding how best they should distribute their endowments. The problem of achieving an optimal outcome at minimal cost has been extensively…
We formulate one methodology to put a value or price on knowledge using well accepted techniques from finance. We provide justifications for these finance principles based on the limitations of the physical world we live in. We start with…
This paper focuses on the stability of the non-arbitrage condition in discrete time market models when some unknown information $\tau$ is partially/fully incorporated into the market. Our main conclusions are twofold. On the one hand, for a…