Related papers: Possible mathematical formulation of liquidity pre…
This survey reviews recent developments in revealed preference theory. It discusses the testable implications of theories of choice that are germane to specific economic environments. The focus is on expected utility in risky environments;…
To determine the welfare implications of price changes in demand data, we introduce a revealed preference relation over prices. We show that the absence of cycles in this relation characterizes a consumer who trades off the utility of…
In this paper an interesting application of mathematics in economics is presented: the formulation of the theory of consumer basic problem, grounded on the concept of preferences relation and operationalized with optimization tools.
We consider the problem of calculating risk-neutral implied volatilities of European options without relying on option mid prices but solely on bid and ask prices. We provide an approach, based on the conic finance paradigm, that allows to…
Literature involving preferences of artificial agents or human beings often assume their preferences can be represented using a complete transitive binary relation. Much has been written however on different models of preferences. We review…
Pricing of high-dimensional options is a deep problem of the Theoretical Financial Mathematics. In this article we present a new class of L\'{e}vy driven models of stock markets. In our opinion, any market model should be based on a…
Diversification represents the idea of choosing variety over uniformity. Within the theory of choice, desirability of diversification is axiomatized as preference for a convex combination of choices that are equivalently ranked. This…
After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…
We explain the main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of rational dynamic asset pricing theory. We derive option pricing formulas when asset returns are altered with a generalized Prospect…
This paper proposes a theory of pricing premised upon the assumptions that customers dislike unfair prices---those marked up steeply over cost---and that firms take these concerns into account when setting prices. Since they do not observe…
We advance a general theory of coherent preference that surrenders restrictions embodied in orthodox doctrine. This theory enjoys the property that any preference system admits extension to a complete system of preferences, provided it…
A pricing formula for discount bonds, based on the consideration of the market perception of future liquidity risk, is established. An information-based model for liquidity is then introduced, which is used to obtain an expression for the…
LLMs are increasingly used to make or support high-stakes decisions under uncertainty, where alignment depends not only on factual accuracy but on how models weigh tradeoffs between different outcomes. We present an empirical pipeline for…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
In the theory of social choice the research is focused around the projection of individual preference orders to the social preference order. Also, the justification of the preference order formalism begins with the concept of utility i.e.…
Possibility theory offers either a qualitive, or a numerical framework for representing uncertainty, in terms of dual measures of possibility and necessity. This leads to the existence of two kinds of possibilistic causal graphs where the…
Possibilistic logic, an extension of first-order logic, deals with uncertainty that can be estimated in terms of possibility and necessity measures. Syntactically, this means that a first-order formula is equipped with a possibility degree…
We consider portfolio optimization under a preference model in a single-period, complete market. This preference model includes Yaari's dual theory of choice and quantile maximization as special cases. We characterize when the optimal…
Preference Inference involves inferring additional user preferences from elicited or observed preferences, based on assumptions regarding the form of the user's preference relation. In this paper we consider a situation in which…
By considering the Wade Formula, we propose a model to study the evolution of the oil price per barrel. Our model shows that the policy of diversification of the energy is to be supported. This model is proposed to see how it is possible to…