The discovery of “EIT waves” after the launch of SOHO spacecraft sparked wide interest among the coronal mass ejection (CME) community since they may be crucial to the understanding of CMEs. However, the nature of this phenomenon is still being hotly debated between fast-mode wave explanation and non-wave explanation. Accumulating observations have shown various features of the “EIT waves”. For...

We provide a new characterization of mean-variance hedging strategies in a general semimartingale market. The key point is the introduction of a new probability measure P ⋆ which turns the dynamic asset allocation problem into a myopic one. The minimal martingale measure relative to P ⋆ coincides with the variance-optimal martin-gale measure relative to the original probability measure P .

We prove that for continuous stochastic processes S based on ((; F; P) for which there is an equivalent martingale measure Q 0 with square-integrable density dQ 0 =dPwe have that the so-called "variance optimal" martingale measure Q opt for which the density dQ opt =dPhas minimal L 2 (P)-norm is automatically equivalent to P. The result is then applied to an approximation problem arising in Mat...

We analyze the joint convergence of sequences of discounted stock prices and Radon-Nicodym derivatives of the minimal martingale measure when interest rates are stochastic. Therefrom we deduce the convergence of option values in either complete or incomplete markets. We illustrate the general result by two main examples: a discrete time i.i.d. approximation of a Merton type pricing model for op...

This paper presents initial work on a system called MarketBayes, a computational market economy where distributed agents trade in uncertain propositions. For any Bayesian network, we have defined a corresponding economy of goods, consumers and producers that essentially “computes” the same information. Although our research thus far has only verified the existence of a market structure capable ...

We prove existence and uniqueness of equilibrium for a general class of twoplayer bidding games. We apply our results to the first price auction, the combination of first and second price auctions, the war of attrition, the all pay auction, as well as combinations of the latter two auction forms. We also treat the first price auction without risk neutrality. Our results deal with the asymmetric...

Standard neutral population genetics theory with a strictly fixed population size has important limitations. An alternative model that allows independently fluctuating population sizes and reproduces the standard neutral evolution is reviewed. We then study a situation such that the competing species are neutral at the equilibrium population size but population size fluctuations nevertheless fa...

(a) Give the definition of an arbitrage opportunity. [1] (b) Show that the existence of Q implies non-existence of arbitrage opportunities. [2] (c) Explain why if there are no arbitrage opportunities in the multi-period model, then there will be no arbitrage opportunities in any underlying single period. Use this result to show that non-existence of arbitrage opportunities implies existence of ...

A pappr by the same authors in the 1981 volume of Stochastic Processes artd Their Applications presented a general model, based on martingales and stochastic integrals, for the economic problem of investing in a portfolio of securities. In particular, and using the terminology developed therein, that paper stated that every integrable contingent claim is attainable (i.e., the model is complete)...

Does experience modulate elicited risk preferences? How does experience shape expectations? This paper provides evidence that investors’ own experiences play a key role in shaping revealed risk preferences and the weighting of past observations when forming expectations. The results suggest that experiencing severe negative or positive returns leads subjects’ revealed preferences to become clos...