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Aggregated data in real world recommender applications often feature fat-tailed distributions of the number of times individual items have been rated or favored. We propose a model to simulate such data. The model is mainly based on social…
Causal influence measures for machine learnt classifiers shed light on the reasons behind classification, and aid in identifying influential input features and revealing their biases. However, such analyses involve evaluating the classifier…
A prototype model of stock market is introduced and studied numerically. In this self-organized system, we consider only the interaction among traders without external influences. Agents trade according to their own strategy, to accumulate…
When explaining black-box machine learning models, it's often important for explanations to have certain desirable properties. Most existing methods `encourage' desirable properties in their construction of explanations. In this work, we…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
The perturbation theory based on typicality introduced in Ref. [1] and further refined in Refs. [2, 3] provides a powerful tool since it is intended to be applicable to a wide range of scenarios while relying only on a few parameters. Even…
A trading system is said to be {robust} if it generates a robust return regardless of market direction. To this end, a consistently positive expected trading gain is often used as a robustness metric for a trading system. In this paper, we…
It is a common misconception that in order to make consistent profits as a trader, one needs to posses some extra information leading to an asset value estimation more accurate than that reflected by the current market price. While the idea…
The indirect transactions between sectors of an economic system has been a long-standing open problem. There have been numerous attempts to conceptually define and mathematically formulate this notion in various other scientific fields in…
Hierarchical analysis is considered and a multilevel model is presented in order to explore causality, chance and complexity in financial economics. A coupled system of models is used to describe multilevel interactions, consistent with…
Financial markets are a classical example of complex systems as they comprise many interacting stocks. As such, we can obtain a surprisingly good description of their structure by making the rough simplification of binary daily returns.…
We reverse-engineer the equilibrium construction process of asset prices in order to obtain returns which depend on firm characteristics, possibly in a linear fashion. One key requirement is that agents must have demands that rely…
Recent studies have revealed a number of striking dependence patterns in high frequency stock price dynamics characterizing probabilistic interrelation between two consequent price increments x (push) and y (response) as described by the…
We propose a novel definition of model exploitation in reinforcement learning. Informally, a world model is exploitable if it implies that one policy should be strictly preferred over another while the environment's true transition model…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
It is generally accepted that the asset price processes contain jumps. In fact, pure jump models have been widely used to model asset prices and/or stochastic volatilities. The question is: is there any statistical evidence from the…
In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…