Related papers: Recursive Preferences, Correlation Aversion, and t…
Recommender systems rely heavily on user feedback to learn effective user and item representations. Despite their widespread adoption, limited attention has been given to the uncertainty inherent in the feedback used to train these systems.…
We revisit the problem of pricing options with historical volatility estimators. We do this in the context of a generalized GARCH model with multiple time scales and asymmetry. It is argued that the reason for the observed volatility risk…
The instability of historical risk factor correlations renders their use in estimating portfolio risk extremely questionable. In periods of market stress correlations of risk factors have a tendency to quickly go well beyond estimated…
Extensive research shows that consumers are generally averse to price discrimination. However, instruments of differential pricing can benefit consumer surplus and alleviate inequity through targeted price discounts. This paper examines how…
We characterize decreasing impatience, a common behavioral phenomenon in intertemporal choice. Discount factors that display decreasing impatience are characterized through a convexit y axiom for investments at fixed interest rates. Then we…
In this paper, we consider the revealed preferences problem from a learning perspective. Every day, a price vector and a budget is drawn from an unknown distribution, and a rational agent buys his most preferred bundle according to some…
Algorithmic Recourse aims to provide actionable explanations, or recourse plans, to overturn potentially unfavourable decisions taken by automated machine learning models. In this paper, we propose an interaction paradigm based on a guided…
This paper demonstrates how reinforcement learning can explain two puzzling empirical patterns in household consumption behavior during economic downturns. I develop a model where agents use Q-learning with neural network approximation to…
Conjoint experiments randomize multidimensional profiles, offering a powerful design for recovering structural preference parameters -- including marginal rates of substitution, willingness to pay, and the distribution of preferences across…
Choice decisions made by users of online applications can suffer from biases due to the users' level of engagement. For instance, low engagement users may make random choices with no concern for the quality of items offered. This biased…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
Growth-optimal portfolios are guaranteed to accumulate higher wealth than any other investment strategy in the long run. However, they tend to be risky in the short term. For serially uncorrelated markets, similar portfolios with more…
We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call `Principal Regression Analysis' (PRA) and for which…
We analyze the limiting behavior of the risk premium associated with the Pareto optimal risk sharing contract in an infinitely expanding pool of risks under a general class of law-invariant risk measures encompassing rank-dependent utility…
Online learning has traditionally focused on the expected rewards. In this paper, a risk-averse online learning problem under the performance measure of the mean-variance of the rewards is studied. Both the bandit and full information…
Probabilistic models can learn users' preferences from the history of their item adoptions on a social media site, and in turn, recommend new items to users based on learned preferences. However, current models ignore psychological factors…
We introduce a pricing kernel with time-varying volatility risk aversion to explain observed time variations in the shape of the pricing kernel. When combined with the Heston-Nandi GARCH model, this framework yields a tractable option…
We review the recently introduced concept of variety of a financial portfolio and we sketch its importance for risk control purposes. The empirical behaviour of variety, correlation, exceedance correlation and asymmetry of the probability…
Using the Crypto Fear & Greed Index and Bitcoin daily data, we document that sentiment extremity predicts excess uncertainty beyond realized volatility. Extreme fear and extreme greed regimes exhibit significantly higher spreads than…
This paper investigates the consumption and risk taking decision of an economic agent with partial irreversibility of consumption decision by formalizing the theory proposed by Duesenberry (1949). The optimal policies exhibit a type of the…