Related papers: Gain-Loss Hedging and Cumulative Prospect Theory
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
The likelihood function represents statistical evidence in the context of data and a probability model. Considerable theory has demonstrated that evidence strength for different parameter values can be interpreted from the ratio of…
Combining cross-section and time series data is a long and well established practice in empirical economics. We develop a central limit theory that explicitly accounts for possible dependence between the two data sets. We focus on common…
Generalized probabilistic theories (GPT) provide a general framework that includes classical and quantum theories. It is described by a cone $C$ and its dual $C^*$. We show that whether some one-way communication complexity problems can be…
We introduce a new type of graphical model called a "cumulative distribution network" (CDN), which expresses a joint cumulative distribution as a product of local functions. Each local function can be viewed as providing evidence about…
Instead of testing for unanimous agreement, I propose learning how broad of a consensus favors one distribution over another (of earnings, productivity, asset returns, test scores, etc.). Specifically, given a sample from each of two…
This paper considers for the first time pursuit-evasion (PE) differential games with irrational perceptions of both pursuer and evader on probabilistic characteristics of environmental uncertainty. Firstly, the irrational perceptions of…
We obtain an elementary characterization of expected utility based on a representation of choice in terms of psychological gambles, which requires no assumption other than coherence between ex-ante and ex-post preferences. Weaker version of…
The Matthew effect describes the phenomenon that in societies the rich tend to get richer and the potent even more powerful. It is closely related to the concept of preferential attachment in network science, where the more connected nodes…
Modeling the joint distribution of data samples and their properties allows to construct a single model for both data generation and property prediction, with synergistic benefits reaching beyond purely generative or predictive models.…
The expected utility hypothesis is a popular concept in economics that is useful for making decisions when the payoff is uncertain. In this paper, we investigate the implications of a fluctuation theorem in the theory of expected utility.…
We tackle the challenge of estimating grouping structures and factor loadings in asset pricing models, where traditional regressions struggle due to sparse data and high noise. Existing approaches, such as those using fused penalties and…
We propose a means to relate properties of an interconnected system to its separate component systems in the presence of cascade-like phenomena. Building on a theory of interconnection reminiscent of the behavioral approach to systems…
This paper gives game-theoretic versions of several results on "merging of opinions" obtained in measure-theoretic probability and algorithmic randomness theory. An advantage of the game-theoretic versions over the measure-theoretic results…
In many real-world prediction tasks, class labels contain information about the relative order between labels that are not captured by commonly used loss functions such as multicategory cross-entropy. Recently, the preference for unimodal…
Does the dominant approach to learn representations (as a side effect of optimizing an expected cost for a single training distribution) remain a good approach when we are dealing with multiple distributions? Our thesis is that such…
We develop a central limit theorem (CLT) for a non-parametric estimator of the transition matrices in controlled Markov chains (CMCs) with finite state-action spaces. Our results establish precise conditions on the logging policy under…
We study a class of iterative combinatorial auctions which can be viewed as subgradient descent methods for the problem of pricing bundles to balance supply and demand. We provide concrete convergence rates for auctions in this class,…
In this article we show that the payment flow of a linear tax on trading gains from a security with a semimartingale price process can be constructed for all c\`agl\`ad and adapted trading strategies. It is characterized as the unique…
The average treatment effect can obscure important heterogeneity when individuals respond differently to a treatment. While the conditional average treatment effect (CATE) function captures such heterogeneity, it is difficult to communicate…