Related papers: The professional trader's paradox

Toral (2002) considered an ensemble of N\geq2 players. In game B a player is randomly selected to play Parrondo's original capital-dependent game. In game A' two players are randomly selected without replacement, and the first transfers one…

Based on Brownian ratchets, a counter-intuitive phenomenon has recently emerged -- namely, that two losing games can yield, when combined, a paradoxical tendency to win. A restriction of this phenomenon is that the rules depend on the…

We study the discrete Bertrand pricing game with a non-increasing demand function. The game has $n \ge 2$ players who simultaneously choose prices from the set $\{1/k, 2/k, \ldots, 1\}$, where $k\in\mathbb{N}$. The player who sets the…

We construct a financial "Turing test" to determine whether human subjects can differentiate between actual vs. randomized financial returns. The experiment consists of an online video-game (http://arora.ccs.neu.edu) where players are…

We present two collective games with new paradoxical features when they are combined. Besides reproducing the so--called Parrondo effect, where a winning game is obtained from the alternation of two fair games, a new effect appears, i.e.,…

The primary objective of this note is to revisit the two envelope problem and propose a simple resolution. It is argued that the paradox arises from the ambiguity associated with the money content $x of the chosen envelope. When X=x is…

In Newcomb's paradox you choose to receive either the contents of a particular closed box, or the contents of both that closed box and another one. Before you choose though, an antagonist uses a prediction algorithm to deduce your choice,…

Interaction strategies for reward in competitive environments are significantly influenced by the nature and extent of available information. In financial markets, particularly foreign exchange (forex), traders operate independently with…

We construct games of chance from simpler games of chance. We show that it may happen that the simpler games of chance are fair or unfavourable to a player andyet the new combined game is favourable -- this is a counter-intuitive…

Two losing gambling games, when alternated in a periodic or random fashion, can produce a winning game. This paradox has been inspired by certain physical systems capable of rectifying fluctuations: the so-called Brownian ratchets. In this…

We present new versions of the Parrondo's paradox by which a losing game can be turned into winning by including a mechanism that allows redistribution of the capital amongst an ensemble of players. This shows that, for this particular…

We explore various extensions of Challet and Zhang's Minority Game in an attempt to gain insight into the dynamics underlying financial markets. First we consider a heterogeneous population where individual traders employ differing `time…

Given two sets of data which lead to a similar statistical conclusion, the Simpson Paradox describes the tactic of combining these two sets and achieving the opposite conclusion. Depending upon the given data, this may or may not succeed.…

We briefly review our recent studies on stochastic processes modelling internet on-line trading. We present a way to evaluate the average waiting time between the observation of the price in financial markets and the next price change,…

Parrondo's paradox is a well-known counterintuitive phenomenon, where the combination of unfavorable situations can establish favorable ones. In this paper, we study one-dimensional discrete-time quantum walks, manipulating two different…

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…

We discuss a model of a two-person, non-cooperative stochastic game, inspired by the discrete version of the red-and-black gambling problem presented by Dubins and Savage. Assume that two players hold certain amounts of money. At each stage…

Parrondo's paradox refers to the counter-intuitive situation where a winning strategy results from a suitable combination of losing ones. Simple stochastic games exhibiting this paradox have been introduced around the turn of the…

An analytical result and an algorithm are derived for the probability distribution of the one-dimensional cooperative Parrondo's games. We show that winning and the occurrence of the paradox depends on the number of players. Analytical…

The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…