Related papers: Binary Option Market Manipulation by Influencing B…
What do binary (or probabilistic) forecasting abilities have to do with overall performance? We map the difference between (univariate) binary predictions, bets and "beliefs" (expressed as a specific "event" will happen/will not happen) and…
This paper builds a model of interactive belief hierarchies to derive the conditions under which judging an arbitrage opportunity requires Bayesian market participants to exercise their higher-order beliefs. As a Bayesian, an agent must…
Positive feedback trading, which buys when prices rise and sells when prices fall, has long been criticized for being destabilizing as it moves prices away from the fundamentals. Motivated by the relationship between positive feedback…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
We introduce a system of kinetic equations describing an exchange market consisting of two populations of agents (dealers and speculators) expressing the same preferences for two goods, but applying different strategies in their exchanges.…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
Motivated by empirical research on bias and opinion formation, we formulate a multidimensional nonlinear opinion-dynamical model where agents have individual biases, which are fixed, as well as opinions, which evolve. The dimensions…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may…
Online experimentation, also known as A/B testing, is the gold standard for measuring product impacts and making business decisions in the tech industry. The validity and utility of experiments, however, hinge on unbiasedness and sufficient…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
The Marketron model, introduced by [Halperin, Itkin, 2025], describes price formation in inelastic markets as the nonlinear diffusion of a quasiparticle (the marketron) in a multidimensional space comprising the log-price $x$, a memory…
This paper concerns sequential hypothesis testing in competitive multi-agent systems where agents exchange potentially manipulated information. Specifically, a two-agent scenario is studied where each agent aims to correctly infer the true…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
We investigate a class of binary choice models with social interactions. We propose a unifying perspective that integrates economic models using a utility function and psychological models using an impact function. A general approach for…
Negative information often exerts a disproportionately strong impact on human decision-making, a phenomenon known as the negativity bias. In behavioral economics, this effect is formally captured by Prospect Theory, which posits that losses…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
Ensuring sufficient liquidity is one of the key challenges for designers of prediction markets. Various market making algorithms have been proposed in the literature and deployed in practice, but there has been little effort to evaluate…
We study a single-buyer pricing problem with unreliable side information, motivated by the increasing use of AI-assisted decision-making and LLM-based predictions. The seller observes a private sample that may be either accurate (coinciding…
We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend…