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.
Revisits behavioral finance option pricing model to align with rational asset pricing theory.
Study models human investors' sub-rational behavior in financial markets.
In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as anomalies the theory of rational finance cannot explain: Predictability of asset returns, The Equity Premium, (The Volatility Puzzle. We offer resolutions of those objections within the rational finance…
We consider a novel application of inverse reinforcement learning with behavioral economics constraints to model, learn and predict the commenting behavior of YouTube viewers. Each group of users is modeled as a rationally inattentive Bayesian agent which solves a contextual bandit problem. Our methodology integrates t…
Accurately predicting future behaviors of surrounding vehicles is an essential capability for autonomous vehicles in order to plan safe and feasible trajectories. The behaviors of others, however, are full of uncertainties. Both rational and irrational behaviors exist, and the autonomous vehicles need to be aware of th…
We derive behavioral finance option pricing formulas consistent with the rational dynamic asset pricing theory. In the existing behavioral finance option pricing formulas, the price process of the representative agent is not a semimartingale, which leads to arbitrage opportunities for the option seller. In the literatu…
Paper develops a framework for learning interpretable representations of sequential decision behavior.
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…
Customer behavior is often assumed to follow weak rationality, which implies that adding a product to an assortment will not increase the choice probability of another product in that assortment. However, an increasing amount of research has revealed that customers are not necessarily rational when making decisions. In…
We give simple homological conditions for a rational homology 3-sphere Y to have infinite order in the rational homology cobordism group, and for a collection of rational homology spheres to be linearly independent. These translate immediately to statements about knot concordance when Y is the branched double cover of …
In economics literature, it is accepted that all people are rational and they try to maximize their utilities as possible as they can. In addition, economic theories are formed with the assumptions not suitable to real life. For instance, indifference curves are drawn with the assumptions that there are two goods, peop…
Study optimal investment with herd behavior using rational decision decomposition.
We consider a framework involving behavioral economics and machine learning. Rationally inattentive Bayesian agents make decisions based on their posterior distribution, utility function and information acquisition cost Renyi divergence which generalizes Shannon mutual information). By observing these decisions, how ca…
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and maximize their constant relative risk aversion expected utility with respect to thei…
Inferring a person's goal from their behavior is an important problem in applications of AI (e.g. automated assistants, recommender systems). The workhorse model for this task is the rational actor model - this amounts to assuming that people have stable reward functions, discount the future exponentially, and construc…
Rational bubbles form in nonstationary models of real assets.
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 Theory value function or a modified Prelec weighting probability function and introdu…
Quantum circuits predict volatility dynamics preserving asymmetry.
New framework recovers reward and rationality parameters from game behavior.
Paper formalizes Simon's satisficing through FFSD, proving its equivalence to expected utility theory.
Social media reduces individual investors' disposition effect through negative information.
Model explains herding and volatility in urban housing prices.
The goal and the main result of the paper is to provide a complete description of the field of rational differential invariants of one class of second order ordinary differential equations with scalar control parameter with respect to Lie pseudo-group of local feedback transformations. In particular, considered class d…
We show that when the genus and punctures of a surface are directly proportional by some rational number the minimal asymptotic translation length in the curve complex has behavior inverse to the square of the Euler characteristic. We also show that when the genus is fixed and the number of punctures varies the behavio…
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…
We analyze a model of learning and belief formation in networks in which agents follow Bayes rule yet they do not recall their history of past observations and cannot reason about how other agents' beliefs are formed. They do so by making rational inferences about their observations which include a sequence of independ…
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by incorporating investor behavior within the framework of dynamic asset pricing theory. To include the views of investors, we employ the method…
Study projective connections on surfaces using osculating spaces.
The k-dimensional Dehn (or isoperimetric) function of a group bounds the volume of efficient ball-fillings of k-spheres mapped into k-connected spaces on which the group acts properly and cocompactly; the bound is given as a function of the volume of the sphere. We advance significantly the observed range of behavior f…
The study reveals traders' risk aversion and a new risk premium from market volumes.
LLMs mimic human traders in finance, but not as much as expected.
Proponents of behavioral finance have identified several "puzzles" in the market that are inconsistent with rational finance theory. One such puzzle is the "excess volatility puzzle". Changes in equity prices are too large given changes in the fundamentals that are expected to change equity prices. In this paper, we of…
The paper analyzes how mutable blockchain protocols affect miner behavior and strategic stability.
LLMs in financial markets show diverse behaviors, from stable to speculative, challenging rational expectations.
We make use of the action of in Heegaard Floer homology to generalize the Ozsváth-Szabó correction terms for -manifolds with standard . We establish the basic properties of these invariants: conjugation invariance, behavior under orientation reversal, additivity, and spin ratio…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior is an approximately optimal solution to an unknown decision problem. These tech…
This paper addresses the statistical properties of time series driven by rational bubbles a la Blanchard and Watson (1982), corresponding to multiplicative maps, whose study has recently be revived recently in physics as a mechanism of intermittent dynamics generating power law distributions. Using insights on the beha…
The paper examines the behavior of Weierstrass measures on stable curves as they approach a nodal stable curve.
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 integrates behavioral distortions into portfolio optimization using implied probability weighting functions.
We discuss the behavior of two magnitudes, physical complexity and mutual information function of the outcome of a model of heterogeneous, inductive rational agents inspired in the El Farol Bar problem and the Minority Game. The first is a measure rooted in Kolmogorov-Chaitin theory and the second one a measure related…
Families of alternating knots (links) and tangles are studied using as building block the conway defined as the twisting of two strands. The regular representation of knots assumes the projection has the minimal number of overpassings, and the minimal number of conways. The continued fraction associated to rational kno…
Study of Gordian graphs' behavior at infinity for various local moves.
Complex behaviors are often driven by an internal model, which integrates sensory information over time and facilitates long-term planning. Inferring an agent's internal model is a crucial ingredient in social interactions (theory of mind), for imitation learning, and for interpreting neural activities of behaving agen…
Assuming that agents' preferences satisfy first-order stochastic dominance, we show how the Expected Utility paradigm can rationalize all optimal investment choices: the optimal investment strategy in any behavioral law-invariant (state-independent) setting corresponds to the optimum for an expected utility maximizer w…
This work improves polynomial approximations for functions with asymmetric behavior.
We construct sequences of pseudo-Anosov mapping classes whose dilatations behave asymptotically like the inverse of the Euler characteristic of the surface they are defined on. These sequences are used to show that if the genus, g, and punctures, n, of a surface are related by a rational ray g=rn then the minimal dilat…
Reinforcement learning agents are prone to undesired behaviors due to reward mis-specification. Finding a set of reward functions to properly guide agent behaviors is particularly challenging in multi-agent scenarios. Inverse reinforcement learning provides a framework to automatically acquire suitable reward functions…