Related papers: Rational Finance Approach to Behavioral Option Pri…
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…
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…
Regression plays a key role in many research areas and its variable selection is a classic and major problem. This study emphasizes cost of predictors to be purchased for future use, when we select a subset of them. Its economic aspect is…
Temporal abstraction allows reinforcement learning agents to represent knowledge and develop strategies over different temporal scales. The option-critic framework has been demonstrated to learn temporally extended actions, represented as…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
Under the Bayesian brain hypothesis, behavioural variations can be attributed to different priors over generative model parameters. This provides a formal explanation for why individuals exhibit inconsistent behavioural preferences when…
Building interpretable parameterizations of real-world decision-making on the basis of demonstrated behavior -- i.e. trajectories of observations and actions made by an expert maximizing some unknown reward function -- is essential for…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
Using frequency distributions of daily closing price time series of several financial market indexes, we investigate whether the bias away from an equiprobable sequence distribution found in the data, predicted by algorithmic information…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
This paper examines the impact of cognitive biases on financial decision-making through a static Bayesian game framework. While traditional economic theory assumes fully rational investors, real-world choices are often shaped by loss…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…
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.…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
On a daily investment decision in a security market, the price earnings (PE) ratio is one of the most widely applied methods being used as a firm valuation tool by investment experts. Unfortunately, recent academic developments in financial…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
We show in a simulation when economic agents are subject to evolution (random change and selection based on the success in the estimation of the result of the gamble) they acquire risk aversive behavior. This behavior appears in the form of…
We introduce and treat rigorously a new multi-agent model of the continuous double auction or in other words the order book (OB). It is designed to explain collective behaviour of the market when new information affecting the market…