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The purpose of this article is to propose a new "theory," the Strategic Analysis of Financial Markets (SAFM) theory, that explains the operation of financial markets using the analytical perspective of an enlightened gambler. The gambler…
Prediction markets mobilize financial incentives to forecast binary event outcomes through the aggregation of dispersed beliefs and heterogeneous information. Their growing popularity and demonstrated predictive accuracy in political…
This paper explores the utility of agent-based simulations in realistically modelling market structures and sheds light on the nuances of optimal dealer strategies. It underscores the contrast between conclusions drawn from probabilistic…
Simple agent based exchange models are a commonplace in the study of wealth distribution of artificial societies. Generally, each agent is characterized by its wealth and by a risk-aversion factor, and random exchanges between agents allow…
We introduce a new framework to model interactions among agents which seek to trade to minimize their risk with respect to some future outcome. We quantify this risk using the concept of risk measures from finance, and introduce a class of…
We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…
We study a setting where agents use no-regret learning algorithms to participate in repeated auctions. \citet{kolumbus2022auctions} showed, rather surprisingly, that when bidders participate in second-price auctions using no-regret bidding…
We formalize an allocation model under ordinal preferences that is more general than the well-studied Shapley-Scarf housing market. In our model, the agents do not just care which house or resource they get but also care about who gets…
On markets with receding prices, artificial noise traders may consider alternatives to buy-and-hold. By simulating variations of the Parrondo strategy, using real data from the Swedish stock market, we produce first indications of a…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…
Financial markets change their behaviours abruptly. The mean, variance and correlation patterns of stocks can vary dramatically, triggered by fundamental changes in macroeconomic variables, policies or regulations. A trader needs to adapt…
It is suggested to consider long term trends of financial markets as a growth phenomenon. The question that is asked is what conditions are needed for a long term sustainable growth or contraction in a financial market? The paper discuss…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
Agents' learning from feedback shapes economic outcomes, and many economic decision-makers today employ learning algorithms to make consequential choices. This note shows that a widely used learning algorithm, $\varepsilon$-Greedy, exhibits…
As financial institutions increasingly rely on machine learning models to automate lending decisions, concerns about algorithmic fairness have risen. This paper explores the tradeoff between enforcing fairness constraints (such as…
We consider an ideal closed stock market, in which 100 traders have economic activities. The assets of the traders change through buying and selling stocks. We simulate the assets under conservation of both total currency and total number…
We consider the mechanism design problem of a principal allocating a single good to one of several agents without monetary transfers. Each agent desires the good and uses it to create value for the principal. We designate this value as the…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
We consider a trading marketplace that is populated by traders with diverse trading strategies and objectives. The marketplace allows the suppliers to list their goods and facilitates matching between buyers and sellers. In return, such a…