Related papers: The value of informational arbitrage
Mutual information is commonly used as a measure of similarity between competing labelings of a given set of objects, for example to quantify performance in classification and community detection tasks. As argued recently, however, the…
In this work, we proposed a new $N$-person game in which the players can bet on two options, for example represented by two boxers. Some of the players have privileged information about the boxers and part of them can provide this…
In this paper we ask whether, given a stock market and an illiquid derivative, there exists arbitrage-free prices at which an utility-maximizing agent would always want to buy the derivative, irrespectively of his own initial endowment of…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
We consider a revenue optimizing seller selling a single item to a buyer, on whose private value the seller has a noisy signal. We show that, when the signal is kept private, arbitrarily more revenue could potentially be extracted than if…
Opportunities for stochastic arbitrage in an options market arise when it is possible to construct a portfolio of options which provides a positive option premium and which, when combined with a direct investment in the underlying asset,…
This article studies the value of information in route choice decisions when a fraction of players have access to high accuracy information about traffic incidents relative to others. To model such environments, we introduce a Bayesian…
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 consider the mean-variance hedging problem under partial Information. The underlying asset price process follows a continuous semimartingale and strategies have to be constructed when only part of the information in the market is…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…
It is shown that absence of arbitrage opportunity in financial markets is a particular case of existence of uncertainty in decision system. Absence of arbitrage opportunity is considered in the sense of the Arrow-Debreu model of financial…
Generalized statistical arbitrage concepts are introduced corresponding to trading strategies which yield positive gains on average in a class of scenarios rather than almost surely. The relevant scenarios or market states are specified via…
We generalize the Arbitrage Pricing Theory (APT) to include the contribution of virtual arbitrage opportunities. We model the arbitrage return by a stochastic process. The latter is incorporated in the APT framework to calculate the…
We introduce the notions of Collective Arbitrage and of Collective Super-replication in a discrete-time setting where agents are investing in their markets and are allowed to cooperate through exchanges. We accordingly establish versions of…
Two problems are studied in this paper. (1) How much external or internal information cost is required to compute a Boolean-valued function with an error at most $1/2-\epsilon$ for a small $\epsilon$? It is shown that information cost of…
In general it is not clear which kind of information is supposed to be used for calculating the fair value of a contingent claim. Even if the information is specified, it is not guaranteed that the fair value is uniquely determined by the…
All sequential decision-making agents explore so as to acquire knowledge about a particular target. It is often the responsibility of the agent designer to construct this target which, in rich and complex environments, constitutes a onerous…
We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen-dollar rate, the dollar-euro rate and the yen-euro rate. Next, we propose a model of…
We undertake a formal study of the value of targeting data to an advertiser. As expected, this value is increasing in the utility difference between realizations of the targeting data and the accuracy of the data, and depends on the…