A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Study models human investors' sub-rational behavior in financial markets.
Predicts stock market crashes using rational bubble model.
This work explains crises in markets without external news using bounded rational agents.
Modeling market dynamics with a bounded-rational agent learning from alpha signals and market impact.
AI makes better decisions, leading to more rational markets.
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as the extreme instance of financial bubbles and crashes, imply that markets (at lea…
We consider a simple model of rational agents competing in a single product market described by simple linear demand curve. Contrary to accepted economic theory, the agents' production levels synchronise in the absence of conscious collusion, leading to a downward spiraling of market total production until the monopoly…
The substantial turmoil created by both 2000 dot-com crash and 2008 subprime crisis has fueled the belief that the two classical paradigms of economics, which are the invisible hand and the rational agent, are not appropriate to describe market dynamics and should be abandoned at the benefit of alternative new theoreti…
We will compare three types of prices, namely, rational (hedging) prices, geometric (growth rate) prices, and martingale (measure) prices. We will show that rational prices in the complete market theory are sometimes contrary to common sense. In the continuous-time case, we insist that the market model should differ be…
Introduces pro-rata rationing for groundwater markets to resolve supply-demand imbalances.
LLMs in financial markets show diverse behaviors, from stable to speculative, challenging rational expectations.
The study reveals traders' risk aversion and a new risk premium from market volumes.
Paper proposes a visual tool for analyzing financial markets.
Model captures decision-making under bounded rationality with prior beliefs and market feedback.
New mechanism designs regulate herding in financial markets.
LLMs mimic human traders in finance, but not as much as expected.
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes and effects. This review and essay evaluates some of the hypotheses offered to …
Unified model connects rational and local martingale bubbles to equity risk premium.
Investors trade based on shifting prices, leading to market inefficiencies.
Study financial contracts pricing in markets with nonproportional costs and constraints.
I summarize the recent work on market (in)efficiency, highlighting key elements why financial markets will never be made efficient. My approach is not by adding more empirical evidence, but giving plausible reasons as to where inefficiency arises and why it's not rational to arbitrage it away.
We justify and give error estimates for binomial approximations of game (Israeli) options in the Black--Scholes market with Lipschitz continuous path dependent payoffs which are new also for usual American style options. We show also that rational (optimal) exercise times and hedging self-financing portfolios of binomi…
Formal framework verifies fairness, uniformity, and rationality in financial market trades.
Revisits multivariate Kyle model, proving unicity of impact matrix.
New distribution resolves excess volatility puzzle in finance.
Model explains herding and volatility in urban housing prices.
The paper explains stock market predictability through a model of heterogeneous beliefs.
The main result of this paper is a probabilistic proof of the penalty method for approximating the price of an American put in the Black-Scholes market. The method gives a parametrized family of partial differential equations, and by varying the parameter the corresponding solutions converge to the price of an American…
The study examines how full information and rationality affect portfolio decisions in uncertain markets.
We study the relation between the trading behavior of agents and volatility in toy markets of adaptive inductively rational agents. We show that excess volatility, in such simplified markets, arises as a consequence of {\em i)} the neglect of market impact implicit in price taking behavior and of {\em ii)} excessive re…
Using virtual stock markets with artificial interacting software investors, aka agent-based models (ABMs), we present a method to reverse engineer real-world financial time series. We model financial markets as made of a large number of interacting boundedly rational agents. By optimizing the similarity between the act…
We develop a multi-curve term structure setup in which the modelling ingredients are expressed by rational functionals of Markov processes. We calibrate to LIBOR swaptions data and show that a rational two-factor lognormal multi-curve model is sufficient to match market data with accuracy. We elucidate the relationship…
The paper interprets financial markets as crowds during booms and busts.
Research examines GMIB and reset options in variable annuities.
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium adjustment mechanisms. This raises the important question of how sensitive such mod…
The paper explains stock predictability by integrating rational finance without behavioral finance assumptions.
This study analyzes mutual influence on investment strategies of financial market agents.
The paper examines insurance market dynamics and optimal regulation.
We introduce a simple generalization of rational bubble models which removes the fundamental problem discovered by [Lux and Sornette, 1999] that the distribution of returns is a power law with exponent less than 1, in contradiction with empirical data. The idea is that the price fluctuations associated with bubbles mus…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes rational decisions that would absolutely minimize the risk. Here we show that, for…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic finite-time singularity formula transforms a Gaussian white noise into a rich time…
Artificial intelligence has impacted many aspects of human life. This paper studies the impact of artificial intelligence on economic theory. In particular we study the impact of artificial intelligence on the theory of bounded rationality, efficient market hypothesis and prospect theory.
This paper highlights the role of risk neutral investors in generating endogenous bubbles in derivatives markets. We find that a market for derivatives, which has all the features of a perfect market except completeness and has some risk neutral investors, can exhibit extreme price movements which represent a violation…
Myopic investors make suboptimal choices that benefit others, leading to market inefficiencies.
Paper shows faster core identification in matching markets.
Study shows cooperation can improve everyone's market efficiency.
The paper extends cost-efficiency analysis to incomplete markets.
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding, the impact of external news and private information, we test within the same mo…