Related papers: Betting Against (Bad) Beta
This article explores the use of machine learning models to build a market generator. The underlying idea is to simulate artificial multi-dimensional financial time series, whose statistical properties are the same as those observed in the…
Various software fault prediction models and techniques for building algorithms have been proposed. Many studies have compared and evaluated them to identify the most effective ones. However, in most cases, such models and techniques do not…
We combine forward investment performance processes and ambiguity averse portfolio selection. We introduce the notion of robust forward criteria which addresses the issues of ambiguity in model specification and in preferences and…
Multi-armed bandit (MAB) algorithms have achieved significant success in sequential decision-making applications, under the premise that humans perfectly implement the recommended policy. However, existing methods often overlook the crucial…
Recently, malevolent user hacking has become a huge problem for real-world companies. In order to learn predictive models for recommender systems, factorization techniques have been developed to deal with user-item ratings. In this paper,…
In this paper, we propose a regression model where the response variable is beta prime distributed using a new parameterization of this distribution that is indexed by mean and precision parameters. The proposed regression model is useful…
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
In this paper, we study a new decision-making problem called the bandit max-min fair allocation (BMMFA) problem. The goal of this problem is to maximize the minimum utility among agents with additive valuations by repeatedly assigning…
Portfolio construction is the science of balancing reward and risk; it is at the core of modern finance. In this paper, we tackle the question of optimal decision-making within a Bayesian paradigm, starting from a decision-theoretic…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…
We investigate the dynamics of a trust game on a mixed population where individuals with the role of buyers are forced to play against a predetermined number of sellers, whom they choose dynamically. Agents with the role of sellers are also…
The CAPM regression is typically interpreted as if the market return contemporaneously \emph{causes} individual returns, motivating beta-neutral portfolios and factor attribution. For realized equity returns, however, this interpretation is…
In this paper, we present betting strategy of a football game using probability theory. We know all betting houses offer slightly unfair odds towards the player. Here we discuss a simple way to figure out which betting house is offering…
We develop a theoretical framework that aims to link micro-level option hedging and stock-specific factor exposure with macro-level market turbulence and explain endogenous volatility amplification during gamma-squeeze events. By explicitly…
This paper investigates how two important sources of risk -- market tail risk and extreme market volatility risk -- are priced into the cross-section of asset returns across various investment horizons. To identify such risks, we propose a…
We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on…
People are often reluctant to sell a house, or shares of stock, below the price at which they originally bought it. While this is generally not consistent with rational utility maximization, it does reflect two strong empirical regularities…
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…