Related papers: Driving Force in Investment
Reinforcement learning algorithms describe how an agent can learn an optimal action policy in a sequential decision process, through repeated experience. In a given environment, the agent policy provides him some running and terminal…
We study an economic model where agents trade a variety of products by using one of three competing rules: "need", "greed" and "noise". We find that the optimal strategy for any agent depends on both product composition in the overall…
We introduce a dynamic optimization framework to analyze optimal portfolio allocations within an information driven contagious distress model. The investor allocates his wealth across several stocks whose growth rates and distress…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
Organisms that grow and survive in uncertain environments may need to change their physiological state as the environment changes. When the environment is uncertain, one strategy known as bet-hedging is to make these changes randomly and…
We solve for the equilibrium dynamics of information sharing in a large population. Each agent is endowed with signals regarding the likely outcome of a random variable of common concern. Individuals choose the effort with which they search…
The inherent volatility and dynamic fluctuations within the financial stock market underscore the necessity for investors to employ a comprehensive and reliable approach that integrates risk management strategies, market trends, and the…
Many potential applications of reinforcement learning (RL) are stymied by the large numbers of samples required to learn an effective policy. This is especially true when applying RL to real-world control tasks, e.g. in the sciences or…
Goal-based investing is an approach to wealth management that prioritizes achieving specific financial goals. It is naturally formulated as a sequential decision-making problem as it requires choosing the appropriate investment until a goal…
Herding, where investors imitate others' decisions rather than relying on their own analysis, is a prevalent phenomenon in financial markets. Excessive herding distorts rational decisions, amplifies volatility, and can be exploited by…
Trading a financial instrument pushes its price and those of other assets, a phenomenon known as cross-impact. To be of use, cross-impact models must fit data and be well-behaved so they can be applied in applications such as optimal…
We consider a popular model of microeconomics with countably many assets: the Arbitrage Pricing Model. We study the problem of optimal investment under an expected utility criterion and look for conditions ensuring the existence of optimal…
A sequential decision-making agent balances between exploring to gain new knowledge about an environment and exploiting current knowledge to maximize immediate reward. For environments studied in the traditional literature, optimal…
In this paper, we present an adaptive investment strategy for environments with periodic returns on investment. In our approach, we consider an investment model where the agent decides at every time step the proportion of wealth to invest…
Prediction problems in finance go beyond estimating the unknown parameters of a model (e.g. of expected returns). This is because such a model would have to include parameters governing the market participants' propensity to change their…
Personalisation of products and services is fast becoming the driver of success in banking and commerce. Machine learning holds the promise of gaining a deeper understanding of and tailoring to customers' needs and preferences. Whereas…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
The Exploration-Exploitation tradeoff arises in Reinforcement Learning when one cannot tell if a policy is optimal. Then, there is a constant need to explore new actions instead of exploiting past experience. In practice, it is common to…
We consider a viable market model. Suppose that new information arrives at the market. We are interested in modeling the market reaction facing to the change of information. In particular we seek for the limit on the intensity of…