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Bilateral trade is one of the most natural and important forms of economic interaction: A seller has a single, indivisible item for sale, and a buyer is potentially interested. The two parties typically have different, privately known…
Recently, a model of opinion formation with kinetic exchanges has been proposed in which a spontaneous symmetry breaking transition was reported [M. Lallouache et al, Phys. Rev. E, {\bf 82} 056112 (2010)]. We generalise the model to…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
This paper shows that Hamiltonians and operators can also be put to good use even in contexts which are not purely physics based. Consider the world of finance. The work presented here {models a two traders system with information exchange…
Two-sided marketplace platforms often run experiments to test the effect of an intervention before launching it platform-wide. A typical approach is to randomize individuals into the treatment group, which receives the intervention, and the…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
In a very simple stock market, made by only two \emph{initially equivalent} traders, we discuss how the information can affect the performance of the traders. More in detail, we first consider how the portfolios of the traders evolve in…
The \$-Game was recently introduced as an extension of the Minority Game. In this paper we compare this model with the well know Minority Game and the Majority Game models. Due to the inter-temporal nature of the market payoff, we introduce…
We consider the problem of belief aggregation: given a group of individual agents with probabilistic beliefs over a set of uncertain events, formulate a sensible consensus or aggregate probability distribution over these events. Researchers…
This paper examines a semi-analytical approach for pricing American options in time-inhomogeneous models characterized by negative interest rates (for equity/FX) or negative convenience yields (for commodities/cryptocurrencies). Under such…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
We look at discovering the impact of market microstructure on equitability for market participants at public exchanges such as the New York Stock Exchange or NASDAQ. Are these environments equitable venues for low-frequency participants…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
In this paper, we propose a two-layer adoption-opinion model to study the diffusion of two competing technologies within a population whose opinions evolve under social influence and adoption-driven feedback. After adopting one technology,…
We develop a stochastic equilibrium model for an electricity market with asymmetric renewable energy forecasts. In our setting, market participants optimize their profits using public information about a conditional expectation of energy…
By incorporating market impact and momentum traders into an agent-based model, we investigate the conditions for the occurrence of self-reinforcing feedback loops and the coevolutionary mechanism of prices and strategies. For low market…
Uplift modeling has been used effectively in fields such as marketing and customer retention, to target those customers who are more likely to respond due to the campaign or treatment. Essentially, it is a machine learning technique that…