Related papers: The indifference value of the weak information
I provide a model of rational inattention with heterogeneity and prove it is observationally equivalent to a state-dependent stochastic choice model subject to attention costs. I demonstrate that additive separability of unobservable…
In an incomplete market setting, we consider two financial agents, who wish to price and trade a non-replicable contingent claim. Assuming that the agents are utility maximizers, we propose a transaction price which is a result of the…
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 review with a tutorial scope the information theory foundations of quantum statistical physics. Only a small proportion of the variables that characterize a system at the microscopic scale can be controlled, for both practical and…
In a market with stochastic interest rates, we consider an investor who can either (i) invest all if his money in a savings account or (ii) purchase zero-coupon bonds and invest the remainder of his wealth in a savings account. The…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
The uncertainty principle can be expressed in entropic terms, also taking into account the role of entanglement in reducing uncertainty. The information exclusion principle bounds instead the correlations that can exist between the outcomes…
Information value, a measure for decision sensitivity, can provide essential information in engineering and environmental assessments. It quantifies the potential for improved decision-making when reducing uncertainty in specific inputs. By…
In many decision-making scenarios, individuals strategically choose what information to disclose to optimize their own outcomes. It is unclear whether such strategic information disclosure can lead to good societal outcomes. To address this…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
We study a continuous-time expected utility maximization problem in which the investor at maturity receives the value of a contingent claim in addition to the investment payoff from the financial market. The investor knows nothing about the…
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
An important issue in concurrency is interference. This issue manifests itself in both shared-variable and communication-based concurrency --- this paper focusses on the former case where interference is caused by the environment of a…
We study superreplication of European contingent claims in discrete time in a large trader model with market indifference prices recently proposed by Bank and Kramkov. We introduce a suitable notion of efficient friction in this framework,…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
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.…
We introduce a new cost function over experiments, f-information, based on the theory of multivariate statistical divergences, that generalizes Sims's classic model of rational inattention as well as the class of posterior-separable cost…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely…
Given a sample of bids from independent auctions, this paper examines the question of inference on auction fundamentals (e.g. valuation distributions, welfare measures) under weak assumptions on information structure. The question is…
A multiproduct seller is more informed than consumers about the value of her products to consumers. The seller posts a price list and segments the market through cheap-talk communication. We find that when both seller's and consumers'…