Related papers: Information-Based Trading
This paper studies a dynamic information acquisition model with payoff externalities. Two players can acquire costly information about an unknown state before taking a safe or risky action. Both information and the action taken are private.…
We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…
We consider a two-way trading problem, where investors buy and sell a stock whose price moves within a certain range. Naturally they want to maximize their profit. Investors can perform up to $k$ trades, where each trade must involve the…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
In this paper we examine inefficiencies and information disparity in the Japanese stock market. By carefully analysing information publicly available on the internet, an `outsider' to conventional statistical arbitrage strategies--which are…
The price impact for a single trade is estimated by the immediate response on an event time scale, i.e., the immediate change of midpoint prices before and after a trade. We work out the price impacts across a correlated financial market.…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
A marketplace is defined where the private data of suppliers (e.g., prosumers) are protected, so that neither their identity nor their level of stock is made known to end customers, while they can sell their products at a reduced price. A…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
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…
Before the massive spread of computer technology, information was far from complex. The development of technology shifted the paradigm: from individuals who faced scarce and costly information to individuals who face massive amounts of…
We consider stopping problems in which a decision maker (DM) faces an unknown state of nature and decides sequentially whether to stop and take an irreversible action; pay a fee and obtain additional information; or wait without acquiring…
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of…
We study the classic bilateral trade setting. Myerson and Satterthwaite show that there is no Bayesian incentive compatible and budget-balanced mechanism that obtains the gains from trade of the first-best mechanism. Consider the…
The binary information collects all those events that may or may not occur. With this kind of variables, a large amount of information can be captured, in particular, about financial assets and their future trends. In our paper, we assume…
We consider a trader who aims to liquidate a large position in the presence of an arbitrageur who hopes to profit from the trader's activity. The arbitrageur is uncertain about the trader's position and learns from observed price…
We study the problem of selling information to a data-buyer who faces a decision problem under uncertainty. We consider the classic Bayesian decision-theoretic model pioneered by [Blackwell, 1951, 1953]. Initially, the data buyer has only…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…