Related papers: The value of partial information
A one-factor asset pricing model with an Ornstein--Uhlenbeck process as its state variable is studied under partial information: the mean-reverting level and the mean-reverting speed parameters are modeled as hidden/unobservable stochastic…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
We investigate opinion dynamics in multi-agent networks when a bias toward one of two possible opinions exists; for example, reflecting a status quo vs a superior alternative. Starting with all agents sharing an initial opinion representing…
Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
I develop a rather simple agent-based model to capture a co-evolution of opinion formation, political decision making and economic outcomes. I use this model to study how societies form opinions if their members have opposing interests.…
We focus on the influence of external sources of information upon financial markets. In particular, we develop a stochastic agent-based market model characterized by a certain herding behavior as well as allowing traders to be influenced by…
Mutual information is commonly used as a measure of similarity between competing labelings of a given set of objects, for example to quantify performance in classification and community detection tasks. As argued recently, however, the…
We consider the problem of classification with a (peer-to-peer) network of heterogeneous and partially informative agents, each receiving local data generated by an underlying true class, and equipped with a classifier that can only…
We develop a novel technique to extract credit-relevant information from the text of quarterly earnings calls. This information is not spanned by fundamental or market variables and forecasts future credit spread changes. One reason for…
This paper develops a novel econometric framework for static discrete choice games with costly information acquisition. In traditional discrete games, players are assumed to perfectly know their own payoffs when making decisions, ignoring…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
A well-intentioned principal provides information to a rationally inattentive agent without internalizing the agent's cost of processing information. Whatever information the principal makes available, the agent may choose to ignore some.…
In revenue maximization of selling a digital product in a social network, the utility of an agent is often considered to have two parts: a private valuation, and linearly additive influences from other agents. We study the incomplete…
Models of auctions or tendering processes are introduced. In every round of bidding the players select their bid from a probability distribution and whenever a bid is unsuccessful, it is discarded and replaced. For simple models, the…
We provide sufficient conditions for semi-nonparametric point identification of a mixture model of decision making under risk, when agents make choices in multiple lines of insurance coverage (contexts) by purchasing a bundle. As a first…
We consider a generalization of the third degree price discrimination problem studied in Bergemann et al. (2015), where an intermediary between the buyer and the seller can design market segments to maximize any linear combination of…
In this paper, we study the behavior of information ratio (IR) as determined by the fundamental law of active investment management. We extend the classic relationship between IR and its two determinants (i.e., information coefficient and…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time…