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We study the two-agent single-item bilateral trade. Ideally, the trade should happen whenever the buyer's value for the item exceeds the seller's cost. However, the classical result of Myerson and Satterthwaite showed that no mechanism can…
The numeraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numeraire portfolio depends on market characteristics, which…
We study a contextual version of the repeated brokerage problem. In each interaction, two traders with private valuations for an item seek to buy or sell based on the learner's-a broker-proposed price, which is informed by some contextual…
We study the model of interacting agents proposed by Chatterjee et al that allows agents to both save and exchange wealth. Closed equations for the wealth distribution are developed using a mean field approximation. We show that when all…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
Pareto law, which states that wealth distribution in societies have a power-law tail, has been a subject of intensive investigations in statistical physics community. Several models have been employed to explain this behavior. However, most…
The existing literature on optimal auctions focuses on optimizing the expected revenue of the seller, and is appropriate for risk-neutral sellers. In this paper, we identify good mechanisms for risk-averse sellers. As is standard in the…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
This note continues investigation of randomness-type properties emerging in idealized financial markets with continuous price processes. It is shown, without making any probabilistic assumptions, that the strong variation exponent of…
We proposed a model of interacting market agents based on the Ising spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of the system magnetization. The model reproduces…
We give a detailed characterization of optimal trades under budget constraints in a prediction market with a cost-function-based automated market maker. We study how the budget constraints of individual traders affect their ability to…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…
We present an agent based model of a single asset financial market that is capable of replicating several non-trivial statistical properties observed in real financial markets, generically referred to as stylized facts. While previous…
Two kinetic exchange models are proposed to explore the dynamics of closed economic markets characterized by random exchanges, saving propensities, and collective transactions. Model I simulates a system where individual transactions occur…
We explore the effect of discounting and experimentation in a simple model of interacting adaptive agents. Agents belong to either of two types and each has to decide whether to participate a game or not, the game being profitable when…
Energy forecasting has attracted enormous attention over the last few decades, with novel proposals related to the use of heterogeneous data sources, probabilistic forecasting, online learn-ing, etc. A key aspect that emerged is that…
Real world markets display power-law features in variables such as price fluctuations in stocks. To further understand market behavior, we have conducted a series of market experiments on our web-based prediction market platform which…
We introduce an autoregressive-type model of prices in financial market taking into account the self-modulation effect. We find that traders are mainly using strategies with weighted feedbacks of past prices. These feedbacks are responsible…
We examine whether and how granular, real-time predictive models should be integrated into central banks' macroprudential toolkit. First, we develop a tractable framework that formalizes the tradeoff regulators face when choosing between…