Guo-Jun Qi, Charu Aggarwal, et al.
IEEE TPAMI
A fundamental question that arises in derivative pricing is why investors trade in a particular derivative at a "fair" price supplied by Arbitrage Pricing Theory (APT). APT establishes a price that is fair for a disinterested investor with a particular set of beliefs about market evolution and attributes trading to differences in those beliefs entertained by the opposite sides of the transaction. We present a model for an investor in a frictionless market that combines investors' incentives in the form of pre-existing liability structures with derivatives pricing procedure tailored for a particular investor. This model enables us to show, through a series of experiments, that investors trade even when their belief structures are identical and accurate. More generally, our study suggests that multi-agent simulation of a financial market can provide a mechanism for conducting experiments that shed light on fundamental properties of the market. As all processes in financial markets (including decision making) become automated, it becomes crucial to have a mechanism by which we can observe the patterns that emerge from a variety of possible investor behaviors. Our simulator, designed as a dealer's market, provides such a mechanism within a certain range of models. © Springer 2005.
Guo-Jun Qi, Charu Aggarwal, et al.
IEEE TPAMI
Yidi Wu, Thomas Bohnstingl, et al.
ICML 2025
Ankit Vishnubhotla, Charlotte Loh, et al.
NeurIPS 2023
Daniel Karl I. Weidele, Hendrik Strobelt, et al.
SysML 2019