Related papers: Does the Market Anticipate? Can it? Should it?
A market model with $d$ assets in discrete time is considered where trades are subject to proportional transaction costs given via bid-ask spreads, while the existence of a num\`eraire is not assumed. It is shown that robust no arbitrage…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
The notion that economies should normally be in equilibrium is by now well-established; equally well-established is that economies are almost never precisely in equilibrium. Using a very general formulation, we show that under dynamics that…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
Recently, there has been a growing interest in modeling planning with information constraints. Accordingly, an agent maximizes a regularized expected utility known as the free energy, where the regularizer is given by the information…
We study information elicitation in cost-function-based combinatorial prediction markets when the market maker's utility for information decreases over time. In the sudden revelation setting, it is known that some piece of information will…
Large scale electricity storage is set to play an increasingly important role in the management of future energy networks. A major aspect of the economics of such projects is captured in arbitrage, i.e. buying electricity when it is cheap…
Meta-training agents with memory has been shown to culminate in Bayes-optimal agents, which casts Bayes-optimality as the implicit solution to a numerical optimization problem rather than an explicit modeling assumption. Bayes-optimal…
This paper proposes a novel energy storage price arbitrage algorithm combining supervised learning with dynamic programming. The proposed approach uses a neural network to directly predicts the opportunity cost at different energy storage…
In this paper we investigate the local risk-minimization approach for a semimartingale financial market where there are restrictions on the available information to agents who can observe at least the asset prices. We characterize the…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
The possibility that the collective dynamics of a set of stocks could lead to a specific basket violating the efficient market hypothesis is investigated. Precisely, we show that it is systematically possible to form a basket with a…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
The existence of time-lagged cross-correlations between the returns of a pair of assets, which is known as the lead-lag relationship, is a well-known stylized fact in financial econometrics. Recently some continuous-time models have been…
Over the past decade, many dealers have implemented algorithmic models to automatically respond to RFQs and manage flows originating from their electronic platforms. In parallel, building on the foundational work of Ho and Stoll, and later…
Modern financial market dynamics warrant detailed analysis due to their significant impact on the world. This, however, often proves intractable; massive numbers of agents, strategies and their change over time in reaction to each other…
The present paper shows that it can be advantageous for traders to publish their information on the true value of an asset even if they (i) cannot build a position in the asset prior to the publication of their information and (ii) cannot…
Standard rational expectations models with an occasionally binding zero lower bound constraint either admit no solutions (incoherence) or multiple solutions (incompleteness). This paper shows that deviations from full-information rational…
Market participants regularly send bid and ask quotes to exchange-operated limit order books. This creates an optimization challenge where their potential profit is determined by their quoted price and how often their orders are…
We study the design of efficient mechanisms under asymmetric awareness and information. Unawareness refers to the lack of conception rather than the lack of information. Assuming quasi-linear utilities and private values, we show that we…