Related papers: Bounded arbitrage and nearly rational behavior
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
This paper studies preference aggregation under ambiguity when agents have incomplete preference relations due to imprecise beliefs. We introduce the "dual" of the Pareto principle, which respects unanimity among individuals, including…
In this paper paired comparison models with stochastic background are investigated. We focus on the models which allow three options for choice and the parameters are estimated by maximum likelihood method. The existence and uniqueness of…
A perfectly rational decision-maker chooses the best action with the highest utility gain from a set of possible actions. The optimality principles that describe such decision processes do not take into account the computational costs of…
The purpose of this article is to develop a general parametric estimation theory that allows the derivation of the limit distribution of estimators in non-regular models where the true parameter value may lie on the boundary of the…
The paper develops no arbitrage results for trajectory based models by imposing general constraints on the trading portfolios. The main condition imposed, in order to avoid arbitrage opportunities, is a local continuity requirement on the…
Impartial selection has recently received much attention within the multi-agent systems community. The task is, given a directed graph representing nominations to the members of a community by other members, to select the member with the…
The relative arbitrage portfolio outperforms a benchmark portfolio over a given time-horizon with probability one. With market price of risk processes depending on the market portfolio and investors, this paper analyzes the multi-agent…
The well-known Condorcet's Jury theorem posits that the majority rule selects the best alternative among two available options with probability one, as the population size increases to infinity. We study this result under an asymmetric…
We provide a logical framework in which a resource-bounded agent can be seen to perform approximations of probabilistic reasoning. Our main results read as follows. First we identify the conditions under which propositional probability…
We present a framework that incorporates the idea of bounded rationality into dynamic stochastic pursuit-evasion games. The solution of a stochastic game is characterized, in general, by its (Nash) equilibria in feedback form. However,…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
We study the subtlety of optimal paternalism when a utilitarian planner has the power to design a discrete choice set for a heterogeneous population with bounded rationality. We first consider the planning problem in abstraction. We show…
Many important economic outcomes result from the combined effects of several choices, so the best option is not determined from each choice in isolation, but depends on how each choice alters total outcomes. We formally show that narrow…
In the last decade the Sznajd Model has been successfully employed in modeling some properties and scale features of both proportional and majority elections. We propose a new version of the Sznajd model with a generalized bounded…
We obtain a necessary and sufficient condition under which random-coefficient discrete choice models, such as mixed-logit models, are rich enough to approximate any nonparametric random utility models arbitrarily well across choice sets.…
In the application of machine learning to real-life decision-making systems, e.g., credit scoring and criminal justice, the prediction outcomes might discriminate against people with sensitive attributes, leading to unfairness. The commonly…
Given a set of conflicting arguments, there can exist multiple plausible opinions about which arguments should be accepted, rejected, or deemed undecided. We study the problem of how multiple such judgments can be aggregated. We define the…
We are interested in the existence of equivalent martingale measures and the detection of arbitrage opportunities in markets where several multi-asset derivatives are traded simultaneously. More specifically, we consider a financial market…
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…