A robust hedging algorithm

Article Abstract:

Two hedging algorithms, the basic minimax strategy and two-period minimax strategy, were deemed effective in addressing problems associated with derivatives trading. The two algorithms are robust computational tools in providing cushion against worst-case potential hedging error related with transaction costs. Although these methods are characterized by suboptimal properties, their performance efficiencies depend largely on the Hessian objective function.

Asset & Risk Management, Methods, Risk assessment, Evaluation, Hedging (Finance), Chebyshev approximation

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Explaining the facts with adaptive agents: the case with mutual fund flows

Article Abstract:

Adaptive agents tend to deviate from rational investment decisions depending on the their previous investment outcomes. Positive returns from past investment actions generate a smaller portfolio adjustment compared to negative returns, forcing the adaptive agents to take on a larger market risk. The findings pose a challenge to the conventional theory that views mutual investors as passive investment strategy-oriented individuals.

Security and commodity exchanges, Investment Offices, Investment Companies, Open-End Investment Funds, Research, Economic aspects, Financial markets, Mutual funds, Investors

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Finite automata play repeated prisoner's dilemma with information processing costs

Article Abstract:

The finitely repeated Prisoner's Dilemma game is considered. In this game, the players are modeled as finite automata and competing with each other in a 'survival of the fittest' evolution contest. Holland's genetic algorithm is used to simulate this contest. The results of the analysis show that players start out hostile to one another but end up playing cooperatively.

Computational complexity, Computational complexity (Machine theory), Game theory, Prisoner's dilemma game

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