Related papers: Optimal Benchmark Design under Costly Manipulation
Bitcoin is currently subject to a significant pay-for-speed trade-off. This is caused by lengthy and highly variable transaction confirmation times, especially during times of congestion. Users can reduce their transaction confirmation…
Minimizing volatility and adjustment costs is of central importance in many economic environments, yet it is often complicated by evolving feasibility constraints. We study a decision maker who repeatedly selects an action from a…
Smart contracts are programs that manage digital assets according to a certain protocol, expressing for instance the rules of an auction. Understanding the possible behaviors of a smart contract is difficult, which complicates development,…
Battery participants in performance-based frequency regulation markets must consider the cost of battery aging in their operating strategies to maximize market profits. In this paper we solve this problem by proposing an optimal control…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
We employ a 2x3 factorial experiment to study two central factors in the design of prediction markets (PMs) for idea evaluation: the overall design of the PM, and the elasticity of market prices set by a market maker. The results show that…
We study the problem of optimal execution of a trading order under Volume Weighted Average Price (VWAP) benchmark, from the point of view of a risk-averse broker. The problem consists in minimizing mean-variance of the slippage, with…
Volume imbalance in a limit order book is often considered as a reliable indicator for predicting future price moves. In this work, we seek to analyse the nuances of the relationship between prices and volume imbalance. To this end, we…
Tree ensemble models such as random forests and boosted trees are among the most widely used and practically successful predictive models in applied machine learning and business analytics. Although such models have been used to make…
Consider a group of effort-averse, or lazy, sensors that seek to minimize the effort invested to collect measurements of a variable. Increasing the effort invested by the sensors improves the quality of the measurements provided to the…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
There has been tremendous interest in the development of formal trust models and metrics through the use of analytics (e.g., Belief Theory and Bayesian models), logics (e.g., Epistemic and Subjective Logic) and other mathematical models.…
We study the power of price discrimination via an intermediary in bilateral trade, when there is a revenue-maximizing seller selling an item to a buyer with a private value drawn from a prior. Between the seller and the buyer, there is an…
We consider the problem of designing a control policy for an infinite-horizon discounted cost Markov decision process $\mathcal{M}$ when we only have access to an approximate model $\hat{\mathcal{M}}$. How well does an optimal policy…
In settings where full incentive-compatibility is not available, such as core-constraint combinatorial auctions and budget-balanced combinatorial exchanges, we may wish to design mechanisms that are as incentive-compatible as possible. This…
We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new…
We study the pricing and the hedging of claim {\psi} which depends on the default times of two firms A and B. In fact, we assume that, in the market, we can not buy or sell any defaultable bond of the firm B but we can only trade…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…
This paper studies the optimal clearing problem for prosumers in peer-to-peer (P2P) energy markets. It is proved that if no trade weights are enforced and the communication structure between successfully traded peers is connected, then the…