We consider a general framework of optimal mechanism design under adverse selection and ambiguity about the type distribution of agents. We prove the existence of optimal mechanisms under minimal assumptions on the contract space and prove that centralized contracting implemented via mechanisms is equivalent to delegat…
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48 results for “Contraction Mechanism”
Study develops a smart contract framework for efficient and fair resource allocation.
problem Lack of rigorous economic foundation in decentralized coordination and smart contract implementations.
method Mechanism design framework with provable convergence guarantees for decentralized price adjustment.
result Proves stability and robustness of the proposed mechanism under various perturbations.
Study optimal contracts for pandemic risk, offering fixed shares and prevention mechanisms.
problem Optimal delegation contracts in the face of pandemic shutdown risk.
method Dynamic principal-agent model with exogenous early termination risk.
result Explicit characterization of optimal wage and action for prevention mechanisms.
The study examines how alternative resource adequacy contract designs affect market participants' risk profiles and resource mix.
problem The tension between promoting reliability and competition in liberalized electricity markets.
method Constructs a stochastic equilibrium model of a competitive market with incomplete risk trading and computes investment equilibria under different contracting regimes.
result Alternative contracting regimes can induce different risk profiles and resource mixes, affecting market outcomes.
LDP is equivalent to contraction of E_γ-divergence, impacting privacy and utility.
problem Analyzing trade-offs between privacy and utility in estimation problems.
method Equivalence of LDP constraints to contraction coefficients of E_γ-divergence, using f-divergences and estimation-theoretic tools.
result LDP guarantees can be expressed in terms of contraction coefficients of arbitrary f-divergences.
Variable annuities: A closer look at ratchet guarantees, hybrid contract designs, and taxationq-fin.PM
Investigates optimal withdrawal strategies in VA contracts with tax and ratchet mechanisms.
problem Optimizing withdrawal strategies and behavior of policyholders in VA contracts with tax and ratchet mechanisms.
method Solving a backward dynamic programming problem to optimize cash flows from VA contracts, considering hybrid products and taxation effects.
result Tax-shielding effect of the cash fund enhances contract attractiveness, ratchet mechanism discourages early surrender, and cash fund discourages active withdrawals.
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable contract to switch from zero to full/perfect collateralization and switch back …
TradeMech nets trades without changing counterparty relationships.
problem Netting trades without altering counterparty exposure in complex financial networks.
method Transforms contracts into chains and cycles, nets designated object multilaterally, and replaces contracts with new multiparty agreements.
result Maximal multilateral netting of a designated object while preserving each agent's profit and counterparty risk.
New smart contract mechanisms evade traditional AML systems by decoupling transaction roles.
problem Current AML systems fail to track economic value migration in composable smart contracts.
method Introduce PEB separation and state-mediated value migration to demonstrate how traditional tracing fails.
result Transfer-layer observation is incomplete and causally ambiguous in composable smart contracts.
We study the solution's existence for a generalized Dynkin game of switching type which is shown to be the natural representation for general defaultable OTC contract with contingent CSA. This is a theoretical counterparty risk mitigation mechanism that allows the counterparty of a general OTC contract to switch from z…
The present work studies and analyzes general defaultable OTC contract in presence of a contingent CSA, which is a theoretical counterparty risk mitigation mechanism of switching type that allows the counterparty of a general OTC contract to switch from zero to full/perfect collateralization and switch back whenever sh…
Extends PoS proof-of-stake transaction fee mechanism with miner utility model.
problem Designing a transaction fee mechanism for PoS protocol that incorporates miner utility.
method Introduced a new mechanism (BSP(θ)) incorporating a parameter θ to ensure user and miner incentives.
result The new mechanism (BSP(θ)) satisfies user and miner incentives and contract proofness.
This paper explores how decentralized finance mitigates traditional finance's shortcomings.
problem Lack of transparency and moral hazard in centralized finance.
method Analysis of smart contracts and decentralized governance in DeFi.
result DeFi mitigates traditional finance's shortcomings through decentralized governance and smart contracts.
Study loan contracts in DLPs using derivatives pricing and neural networks.
problem Optimizing and hedging risks in decentralized lending contracts.
method Derivatives pricing theory, deep neural networks, and statistical arbitrage.
result Developed a method to hedge risks in lending contracts and exploit arbitrage opportunities.
We propose a new non-parametric framework for learning incrementally stable dynamical systems x' = f(x) from a set of sampled trajectories. We construct a rich family of smooth vector fields induced by certain classes of matrix-valued kernels, whose equilibria are placed exactly at a desired set of locations and whose …
Suppliers (including companies and individual prosumers) may wish to protect their private information when selling items they have in stock. A market is envisaged where private information can be protected through the use of differential privacy and option contracts, while privacy-aware suppliers deliver their stock a…
Locally private mechanisms' output divergence bounds derived.
problem Bounding divergence between locally private mechanisms' outputs.
method Sharp upper bounds on divergence between input and output distributions.
result Established locally private versions of estimation risk bounds.
Paper eliminates warm-up phase for PO in linear MDPs, achieving optimal regret.
problem Costly warm-up phase in PO algorithms for linear MDPs.
method Simple contraction mechanism replaces warm-up phase.
result Achieves rate-optimal regret with improved dependence on problem parameters.
A new adaptive pricing framework for perpetual protocols using liquidity curves and on-chain oraclesq-fin.TR
Adaptive pricing framework for perpetual contracts using liquidity curves and oracles.
problem Ensuring stable and predictable pricing for perpetual contracts.
method Uses liquidity curves and on-chain oracles with parabolic and sigmoid functions to quote prices and fees.
result Ensures pricing stability and predictability through adaptive pricing framework.
With the inflation of the data, clustering analysis, as a branch of unsupervised learning, lacks unified understanding and application of its mathematical law. Based on the view of fixed point, this paper restates the model-based clustering and proposes a unified clustering framework. In order to find fixed points as c…
Randomly initialized transformers show extreme token preferences.
problem Structural biases in randomly initialized transformers.
method Dissection of transformer architecture at initialization.
result Initialization-induced biases persist throughout training.
Market Impact of Small Ordersq-fin.TR
Study examines market impact of small orders in futures contracts.
problem Understanding market impact of small orders in financial markets.
method Empirical study using tick data, normalizing results, proposing a simple linear model.
result Market impact of small orders is either linear or concave, depending on the instrument.
Bayesian models combine experts with a flexible gating mechanism for complex data.
problem Theoretical properties of Bayesian mixture-of-experts models with softmax gating remain unexplored.
method Investigated asymptotic behavior of posterior distribution for density estimation, parameter estimation, and model selection.
result Established posterior contraction rates for density estimation and parameter estimation, providing insights for practical model design.
We consider compact convex hypersurfaces contracting by functions of their curvature. Under the mean curvature flow, uniformly convex smooth initial hypersurfaces evolve to remain smooth and uniformly convex, and contract to points after finite time. The same holds if the initial data is only weakly convex or non-smoot…
Paper proposes a decentralized payment clearing system using blockchain and optimal bidding strategies.
problem Default contagion in a network of smart contracts cleared through blockchain.
method Constructs a decentralized clearing mechanism using blockchain and optimal bidding strategies.
result Proves existence and uniqueness of equilibrium clearing condition for terminal net worths.
A financial contract's value is determined by a quantum measurement outcome, and a pricing state exists to value it.
problem Valuing financial contracts contingent on quantum measurement outcomes.
method Proving the existence of a pricing state equivalent to the physical state on null spaces, and solving optimization problems for optimal contract payouts.
result There exists a pricing state equivalent to the physical state on null spaces, leading to a pricing function for financial contracts.
Develops a new volatility model for prediction markets.
problem Volatility forecasting in prediction markets differs from standard asset markets.
method Combines Wright-Fisher and Glosten-Milgrom mechanisms to model binary prediction markets.
result Structural model outperforms standard ARCH/GARCH models in volatility forecasting.
Rényi Pufferfish Privacy: General Additive Noise Mechanisms and Privacy Amplification by Iterationcs.CR
Enhances privacy in machine learning through Rényi Pufferfish mechanisms.
problem Designing general and efficient Pufferfish mechanisms that maintain privacy and utility.
method Introduces a Rényi divergence-based variant of Pufferfish, generalizes the Wasserstein mechanism, and proves privacy amplification results.
result Extends the applicability of Pufferfish framework and provides stronger privacy guarantees.
A new flow method reduces Lorentz contraction to a simple algebraic decay.
problem Reducing Lorentz contraction in geometric models.
method Variational scalar conformal flow with algebraic decay.
result Explicit algebraic decay law for energy functional.
Gaming-Resistant Insurance Contracts for Autonomous AI Agents: Strategy-Proof Toll Mechanism Designcs.GT
Insurance contracts for autonomous AI agents must be actuarially sound and resistant to gaming.
problem Designing insurance contracts for autonomous AI agents that are actuarially sound and resistant to gaming.
method Characterizing a five-attack space and proving the actuarial runtime is gaming-resistant.
result An incentive-compatible layer for actuarial control of autonomous-agent side effects.
Extends Black model to include commodities with potential negative prices.
problem Modeling commodities with the possibility of negative prices due to delivery failures.
method Integrates a `delivery liability' option into the Black model.
result Validates the approach through a simple generalization of the Black model.
We introduce a model in which a regulator employs mechanism design to embed her human capital beta signal(s) in a firm's capital structure, in order to enhance the value of her post career change indexed executive stock option contract with the firm. We prove that the agency cost of this revolving door behavior increas…
Many independent studies on stocks and futures contracts have established that market impact is proportional to the square-root of the executed volume. Is market impact quantitatively similar for option markets as well? In order to answer this question, we have analyzed the impact of a large proprietary data set of opt…
Do Prediction Markets Match Option Prices? Bitcoin Threshold Evidence from Binance and Polymarketq-fin.TR
Prediction markets and crypto options show persistent pricing gaps.
problem Comparing prediction markets and crypto options for identical payoffs.
method Comparing Polymarket Yes prices with Binance call option prices.
result Mean pricing gap of 5.6 percentage points across 214 hourly observations.
The study identifies conditions under which algorithmic stability explains generalization in interpolating learning systems.
problem Understanding when algorithmic stability explains generalization in interpolating learning systems.
method Modeling training as a function-space trajectory and measuring sensitivity to single-sample perturbations.
result There exist interpolating regimes with small risk where contractive sensitivity cannot hold, showing that stability is not a universal explanation.
EControl improves fast distributed optimization with compression and error control.
problem Stable convergence issues in distributed training with compression.
method Proposes EControl to regulate error compensation and prove fast convergence.
result Proves fast convergence for EControl in various convex settings without additional assumptions.
This paper analyzes P2P collaborative insurance products and network structure impact.
problem Analyzing P2P collaborative insurance products and their network structure impact.
method Examined a P2P insurance product with reciprocal risk sharing contracts, studied network structure impact on risk reduction, and discussed optimal reciprocal commitments.
result The network structure, particularly the distribution of degrees, significantly impacts risk reduction in P2P insurance products.
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement settled on a maturity date. Our purpose is to design a Heath-Jarrow-Morton framew…
Study finds discrepancies in open interest reporting for Bitcoin perpetual swaps.
problem Misquoted open interest in perpetual swaps leads to liquidity and solvency concerns.
method Analyzed tick-by-tick data from seven exchanges to identify discrepancies.
result Open interest reported by exchanges varies widely, some implausible.
Develops a new volatility model for prediction markets.
problem Volatility forecasting in prediction markets differs from standard asset markets.
method Combines Wright-Fisher and Glosten-Milgrom mechanisms to model binary prediction markets.
result Structural model outperforms standard ARCH/GARCH models in volatility forecasting.
The paper explores coalescent contractions in contractible spaces, providing criteria and examples.
problem Existence and absence of coalescent contractions in contractible spaces.
method Analysis of contractible finite simplicial complexes and criteria for coalescent contractions.
result Criteria for contractible finite simplicial complexes that ensure no coalescent contractions.
Vault as a credit instrumentq-fin.RM
Derives metrics for DeFi vaults, addressing credit risk.
problem Credit risk in DeFi lending vaults.
method Three-level decomposition of vault risk; six structural features identified.
result Estimation architecture for credit risk metrics.
The study tests a functional-form restriction on risk exposure dynamics using margin debt data.
problem Understanding risk exposure dynamics under capital constraints and slack.
method Testing a regime-conditional functional-form restriction on aggregate risk-exposure dynamics implied by VaR-constrained intermediary models.
result The contraction and growth of exposures under capital constraints and slack are observed and tested.
Proof of Stake (PoS) is a burgeoning Sybil resistance mechanism that aims to have a digital asset ("token") serve as security collateral in crypto networks. However, PoS has so far eluded a comprehensive threat model that encompasses both Byzantine attacks from distributed systems and financial attacks that arise from …
Zero-sum games have long guided artificial intelligence research, since they possess both a rich strategy space of best-responses and a clear evaluation metric. What's more, competition is a vital mechanism in many real-world multi-agent systems capable of generating intelligent innovations: Darwinian evolution, the ma…
Blockchain protocol improves traditional mutual funds with performance fees and investor protection.
problem Operational issues and performance fees in traditional mutual funds.
method Developed a blockchain protocol that integrates features of mutual funds and hedge funds.
result Blockchain can simplify performance fee calculations and protect investors.
Computable contracts simplify financial transactions and reduce legal costs.
problem Difficulty in querying, executing, and analyzing text-based financial contracts.
method Develop a Contract Definition Language and illustrate use cases.
result Substantial improvements in customer experience and cost reduction.
Spectral Gradient Descent Mitigates Anisotropy-Driven Misalignment: A Case Study in Phase Retrievalstat.ML
SpecGD mitigates misalignment in phase retrieval models with anisotropic inputs.
problem Misalignment during gradient descent in phase retrieval models with anisotropic inputs.
method Spectral gradient descent modifies gradient updates to preserve directional information and remove spike amplification.
result SpecGD removes spike amplification, leading to stable alignment and accelerated noise contraction.