The paper extends option pricing theory for markets with informed traders.
problem Discontinuity in option pricing for markets with informed traders.
method New models for option pricing in complete markets considering informed traders' information on stock price direction and return mean.
result The discontinuity puzzle in option pricing is resolved using continuous diffusion price processes.
Extends option pricing theory for informed traders.
problem Empirical evidence for non-Gaussian returns, long-range dependence, volatility clustering, and asymmetric information.
method Extended option pricing theory to account for these factors.
result Improved understanding of option pricing for informed traders.
This paper proposes a new geometric framework for asset pricing.
problem The asymmetry between risk-neutral and physical measures in asset pricing.
method Information geometry, focusing on the relativity of probabilistic reference frames.
result Unified explanation for price fluctuations, event-driven behavior, and risk premia.
Cross-shareholding improves stock price synchronicity in China.
problem Measuring price informativeness in Chinese stock market firms.
method Analyzing cross-shareholding networks and centrality measures.
result Cross-shareholding reduces price delay and enhances price synchronicity.
New pricing algorithm learns demand curves and optimizes prices in dynamic markets.
problem Dynamic pricing in markets with incomplete demand information and shifting conditions.
method Actor-Critic Information-Directed Pricing (ACIDP) using IDS algorithms and auditing procedures.
result ACIDP outperforms UCB and TS in market environment shifts.
Paper develops privacy-preserving dynamic pricing policy for e-commerce.
problem Protecting customer privacy in dynamic pricing with personalized information.
method Uses differential privacy framework to develop a privacy-preserving policy.
result Achieves both privacy and performance guarantees in dynamic pricing.
Model analyzes how delayed information impacts option pricing.
problem Effects of delayed information on option pricing.
method Binomial model, closed form formula for convex contingent claims, convergence analysis.
result Delayed information exaggerates the volatility smile.
Investors pay for additional asset information based on utility maximization.
problem Determining the optimal price for additional asset information.
method Solving a stochastic control problem with partial information and utility maximization.
result Investors choose to purchase information at a deterministic time.
The paper analyzes how knowing the market price of risk impacts optimal investment strategies.
problem Optimal allocation in financial markets with uncertain market price of risk.
method Solves optimal allocation problem in continuous time for CRRA utility investors in two scenarios: full and partial information.
result Investors are willing to pay for more accurate information on market price of risk, affecting optimal strategies.
We describe an agent-based simulation of a fictional (but feasible) information trading business. The Gas Price Information Trader (GPIT) buys information about real-time gas prices in a metropolitan area from drivers and resells the information to drivers who need to refuel their vehicles. Our simulation uses real wor…
Study on pricing rules for income streams with partial insider information.
problem Determining the value of partial information in pricing rules for income streams.
method Analyzes three types of agents with varying levels of jump information and derives explicit state price densities.
result Explicit formulas for pricing rules with different levels of jump information are provided.
This paper investigates the impact of dark pools on price discovery (the efficiency of prices on stock exchanges to aggregate information). Assets are traded in either an exchange or a dark pool, with the dark pool offering better prices but lower execution rates. Informed traders receive noisy and heterogeneous signal…
The paper analyzes binary option markets with exogenous information and price sensitivity.
problem Analyzing binary option markets with exogenous information and price sensitivity.
method Derive and analyze a continuous model of binary option markets with exogenous information, using Filippov surfaces and general assumptions on purchasing rules.
result Price always converges when exogenous information is constant, and price sensitivity affects price lag vs. information.
New method identifies informed traders in prediction markets.
problem How information is incorporated into market prices is unknown.
method Kyle model applied to field experiment prediction market data.
result Traders with significant price impact are identified as informed.
The paper analyzes how market prices respond to information processing and non-linear dynamics.
problem Understanding how market prices change in response to information.
method Logistic Continuous Wavelet Transformation method applied to SP 500 market data.
result Identifies patterns in market dynamics and describes them using a new theory of reflexive communication.
Informer improves option pricing accuracy in volatile markets.
problem Challenges in accurate option pricing due to market volatility and traditional model limitations.
method Applying Informer, a Transformer-based neural network, for option pricing.
result Informer outperforms traditional models in option pricing accuracy.
Researchers develop a pricing method for contingent claims under partial information and short selling constraints.
problem Pricing contingent claims with partial information and short selling restrictions.
method Derive a dual problem using conjugate duality theory and conditions for strong duality.
result Characterization of contingent claim prices involving martingale and super-martingale conditions.
Improved price bounds for multi-asset derivatives using market option data.
problem Creating robust price bounds for multi-asset derivatives under market-implied dependence.
method Extracting inter-asset dependence information from market option prices and applying modified martingale optimal transport.
result Improved price bounds for multi-asset derivatives, demonstrating relevance and tractability.
We investigate asymmetry of information in the context of robust approach to pricing and hedging of financial derivatives. We consider two agents, one who only observes the stock prices and another with some additional information, and investigate when the pricing--hedging duality for the former extends to the latter. …
We consider utility maximization problem for semi-martingale models depending on a random factor ξ. We reduce initial maximization problem to the conditional one, given ξ=u, which we solve using dual approach. For HARA utilities we consider information quantities like Kullback-Leibler information and Hellinger inte…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market then determines the overall magnitude of asset volatility. By letting this inform…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically short. Hence, viewed as a tradable asset, information shares the characteristics…
The FSRM uses a multifractional process to capture price multifractality, revealing serial information for forecasting.
problem Capturing multifractal price dynamics for better forecasting.
method Developed a fractional stochastic regularity model based on multifractional processes and information theory.
result The serial information of the regularity process Ht can be theoretically determined, aiding in forecasting future price increments. In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary economy. The nominal pricing kernel is at any given time assumed to be given by …
Study finds adding more information to robust option pricing does not improve bounds.
problem Exploring robust pricing of financial claims using minimal assumptions.
method Empirical study of variance options, incorporating intermediate market data.
result Incorporating more information does not improve robust pricing bounds.
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market filtration is generated by a collection of information processes associated with economic…
Physics-Informed Neural Network improves option pricing accuracy.
problem Improving option pricing accuracy using machine learning.
method Physics-Informed Neural Network (PINN) applied to Black-Scholes equation.
result PINN model accurately captures option pricing behavior on both simulated and real market data.
Research predicts XRP price anomalies using graph topologies.
problem Forecasting extreme price movements in XRP cryptoasset.
method Analyzed topological features of XRP transaction graphs.
result Topological features indicate extreme price surges.
New method accurately evaluates asset pricing under uncertainty and ambiguity.
problem Accurately evaluating asset prices in markets with ambiguous and uncertain information.
method Proposes a new generative uncertainty mechanism based on Bayesian Inference and Correntropy (BIC) technique.
result Precise modeling of asset information can estimate price changes effectively.
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow is modelled by a random variable that can be expressed as a function of a colle…
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 bond price. Analysis of the bond price dynamics shows that the bond volatility is…
Detects non-linear causality between social media sentiment and cryptocurrency prices.
problem Detecting causality between non-linear time series data.
method Use of transfer entropy to measure information transfer, validating against synthetic data, and applying significance tests.
result Significant non-linear causality detected, orders of magnitude greater than linear causality.
Proposes indifference pricing to estimate weak information value.
problem Estimating the value of weak information in financial models.
method Tractable framework quantifying additional information, stability analysis.
result Sharp conditions for stability with counterexamples, including replicable claims.
A new method for pricing European options in changing market conditions.
problem Lack of closed-form solutions for pricing European options in regime-switching models.
method Physics-informed residual learning (PIRL) for efficient option pricing.
result PIRL eliminates the need for retraining and offers near-instantaneous pricing.
Model predicts price polarity of real estate properties using website information.
problem Predicting price polarity of real estate properties.
method Uses doc2vec and xgboost to learn correlations between price and text descriptions of properties.
result Text descriptions provide slightly higher accuracy than features alone.
When investors have heterogeneous attitudes towards risk, it is reasonable to assume that each investor has a pricing kernel, and that these individual pricing kernels are aggregated to form a market pricing kernel. The various investors are then buyers or sellers depending on how their individual pricing kernels compa…
Bitcoin option prices reflect both market maker supply and trader demand, especially from those with insider information.
problem Understanding how market prices of bitcoin options are influenced by both market makers and informed traders.
method Analysis of Deribit options tick-level data to identify supply and demand effects.
result At-the-money option prices are driven by volatility traders, while out-of-the-money options are influenced by both volatility traders and those with insider information.
The paper analyzes financial market turbulence using mathematical physics.
problem Understanding price fluctuations caused by information asymmetry.
method Spectrum analysis to decompose pricing patterns.
result Identifies phase correlations in financial stock market turbulence.
Study finds on-chain data can proxy off-chain cryptocurrency pricing.
problem Develop methods to proxy off-chain cryptocurrency pricing using on-chain data.
method Graphical models, mutual information, and ensemble machine learning.
result A significant amount of pricing information is contained in on-chain data, but precise prices are hard to recover except on short time scales.
This paper presents a method to estimate mid-prices of European corporate bonds using real-time dealer information.
problem Estimating mid-prices in illiquid markets where direct market prices are not available.
method Bayesian approach using particle filtering and sequential Monte Carlo.
result A new method for real-time mid-price estimation of corporate bonds.
A limit order book provides information on available limit order prices and their volumes. Based on these quantities, we give an empirical result on the relationship between the bid-ask liquidity balance and trade sign and we show that liquidity balance on best bid/best ask is quite informative for predicting the futur…
The paper develops a pricing method for insurance contracts under incomplete information.
problem Pricing pure endowment contracts with limited insurer information.
method Modeling with stochastic processes, using BSDEs for indifference pricing under partial information.
result The indifference price of insurance derivatives is characterized via BSDEs.
We provide a microfoundation for linear price impact models in a stationary market.
problem Deriving linear price impact models in a stationary market with asymmetric information.
method Deriving linear price impact models as the equilibrium of an agent-based system.
result The model shows compatibility with universal price diffusion at small times and non-universal mean-reversion at larger times.
While market is a social field where information flows over the interacting agents, there have been not so many methods to observe the spreading information in the prices comprising the market. By incorporating the entropy transfer in information theory in its relation to the Granger causality, the paper proposes a tre…
Informed traders strategically reveal noisier signals, making prices less responsive to public information.
problem How informed traders strategically reveal signals impacts market prices and utility.
method Modeling a market with an informed trader, an uninformed trader, and liquidity providers, proving equilibrium existence.
result In equilibrium, the insider strategically reveals a noisier signal, making prices less responsive to public information.
This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is determined by a collection of independent market factors called X-factors. The ma…
Estimates price impacts and finds asymmetric market structures.
problem Understanding asymmetric price impacts in financial markets.
method Quantifies price impacts using spectral statistics and Shannon entropy.
result Asymmetric and non-random price impacts across the market.
Trading strategy advantage based on information asymmetry.
problem Trading advantage due to information disparity.
method Modeling market information, analyzing risk-neutral distribution, proving value difference.
result First trader's position is strictly more valuable than the second.