Related papers: Driving Force in Investment
A strategy is a plan, method, or series of actions for obtaining a specified goal. A military strategy typically employs the threat or use of military force in opposition to an adversary, and is called upon where large scale force is viewed…
We propose a multi-agent model of an asset market and study conditions that guarantee that the strategy of an individual agent cannot outperform the market. The model assumes a mean-field approximation of the market by considering an…
This paper analyzes the equilibrium of insurance market in a dynamic setting, focusing on the interaction between insurers' underwriting and investment strategies. Three possible equilibrium outcomes are identified: a positive insurance…
We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic…
We study strategic interactions in a broker-mediated market in which agents learn and exploit each other's private information. A broker provides liquidity to an informed trader and to noise traders while managing inventory in a lit market.…
Motivated by the prevalence of prediction problems in the economy, we study markets in which firms sell models to a consumer to help improve their prediction. Firms decide whether to enter, choose models to train on their data, and set…
The recent crisis and the following flight to simplicity put most derivative businesses around the world under considerable pressure. We argue that the traditional modeling techniques must be extended to include product design. We propose a…
The debate between active and passive investment strategies has been ongoing for many years and is far from being over. In this paper, we show that the choice of an optimal portfolio management strategy depends on an investment climate,…
Portfolio diversification is a cornerstone of modern finance, while risk aversion is central to decision theory; both concepts are long-standing and foundational. We investigate their connections by studying how different forms of…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
Our work investigates the economic efficiency of the prevailing "ladder-step" investment strategy in oil and gas exploration, which advocates for the incremental acquisition of geological information throughout the project lifecycle. By…
Much of the theoretical work on strategic voting makes strong assumptions about what voters know about the voting situation. A strategizing voter is typically assumed to know how other voters will vote and to know the rules of the voting…
We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…
We study optimal investment problems under the framework of cumulative prospect theory (CPT). A CPT investor makes investment decisions in a single-period financial market with transaction costs. The objective is to seek the optimal…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
We find the optimal investment strategy to minimize the expected time that an individual's wealth stays below zero, the so-called {\it occupation time}. The individual consumes at a constant rate and invests in a Black-Scholes financial…
A novel algorithm for actively trading stocks is presented. While traditional expert advice and "universal" algorithms (as well as standard technical trading heuristics) attempt to predict winners or trends, our approach relies on…
How can graph theory be applied to investing in the stock market? The answer may help investors realize the true risks of their investments, help prevent recessions like that of 2008, and increase financial literacy amongst students. Using…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…