Related papers: The value of informational arbitrage
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
Statistical arbitrage is a class of financial trading strategies using mean reversion models. The corresponding techniques rely on a number of assumptions which may not hold for general non-stationary stochastic processes. This paper…
Consider a network design application where we wish to lay down a minimum-cost spanning tree in a given graph; however, we only have stochastic information about the edge costs. To learn the precise cost of any edge, we have to conduct a…
We consider an American contingent claim on a financial market where the buyer has additional information. Both agents (seller and buyer) observe the same prices, while the information available to them may differ due to some extra…
This paper builds a model of interactive belief hierarchies to derive the conditions under which judging an arbitrage opportunity requires Bayesian market participants to exercise their higher-order beliefs. As a Bayesian, an agent must…
When multiple informative equilibria are possible in a general cheap talk game, how much information can a principal guarantee herself? To answer this question, I define the notion of worst-case implementation-implementation via the worst…
A natural way of quantifying the ``amount of information'' in decision problems yields a globally concave value for information. Another (in contrast, adversarial) way almost never does.
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
We study a contextual version of the repeated brokerage problem. In each interaction, two traders with private valuations for an item seek to buy or sell based on the learner's-a broker-proposed price, which is informed by some contextual…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
In cooperative human decision-making, agreements are often not total; a partial degree of agreement is sufficient to commit to a decision and move on, as long as one is somewhat confident that the involved parties are likely to stand by…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
Auctions with partially-revealed information about items are broadly employed in real-world applications, but the underlying mechanisms have limited theoretical support. In this work, we study a machine learning formulation of these types…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
"Fundamental theorem of asset pricing" roughly states that absence of arbitrage opportunity in a market is equivalent to the existence of a risk-neutral probability. We give a simple counterexample to this oversimplified statement. Prices…
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
A seller posts a price for a single object. The seller's and buyer's values may be interdependent. We characterize the set of payoff vectors across all information structures. Simple feasibility and individual-rationality constraints…
This paper studies the equilibrium pricing of asset shares in the presence of dynamic private information. The market consists of a risk-neutral informed agent who observes the firm value, noise traders, and competitive market makers who…
We add the assumption that players know their opponents' payoff functions and rationality to a model of non-equilibrium learning in signaling games. Agents are born into player roles and play against random opponents every period.…