Hannah Gampe, Christopher Griffin
arXiv 18 May 2022 · Finance — Trading · publishedCommunications in Nonlinear Science and Numerical Simulation (2022) · 4 citations (OpenAlex)
arXiv:2206.07132 · PDF · DOI · OpenAlex · Extracted main text
In this paper, we derive and analyze a continuous of a binary option market with exogenous information. The resulting non-linear system has a discontinuous right hand side, which can be analyzed using zero-dimensional Filippov surfaces. Under general assumptions on purchasing rules, we show that when exogenous information is constant in the binary asset market, the price always converges. We then investigate market prices in the case of changing information, showing empirically that price sensitivity has a strong effect on price lag vs. information. We conclude with open questions on general $n$-ary option markets. As a by-product of the analysis, we show that these markets are equivalent to a simple recurrent neural network, helping to explain some of the predictive power associated with prediction markets, which are usually designed as $n$-ary option markets.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | author author N. Nakshatri, author A. Menon, author C. L.\ Giles, au… (2021) ) NoStop self | 1.000 | 9 | 3 | 100% |
| 2 | author author A. F.\ Filippov,\ @noop title Differential equations w… (2013) ) NoStop | 0.811 | 4 | 2 | 100% |
| 3 | author author M. Bernasconi, author F. Cacciamani, author S. Fiorava… (2022) ) NoStop | 0.737 | 3 | 2 | 100% |
| 4 | author author K. Tuyls, author K. Verbeeck, \ and\ author T. Lenaert… (2003) )\ pp.\ pages 693–700 NoStop | 0.737 | 3 | 2 | 100% |
| 5 | author author J. Abernethy, author Y. Chen, \ and\ author J. Wortman… (2011) )\ pp.\ pages 297–306 NoStop | 0.511 | 2 | 1 | 100% |
| 6 | author author Y. Chen\ and\ author J. W.\ Vaughan,\ in\ @noop bookti… (2010) )\ pp.\ pages 189–198 NoStop | 0.511 | 2 | 1 | 100% |
| 7 | author author C. F.\ Manski,\ @noop journal journal economics letter… (2006) ) NoStop | 0.511 | 2 | 1 | 100% |
| 8 | author author J. Wolfers\ and\ author E. Zitzewitz,\ @noop title Int… (2006) ) NoStop | 0.511 | 2 | 1 | 100% |
| 9 | author author J. Berg, author R. Forsythe, \ and\ author T. Rietz,\… (1997) )\ pp.\ pages 444–463 NoStop | 0.405 | 1 | 1 | 100% |
| 10 | author author D. T.\ Breeden\ and\ author R. H.\ Litzenberger,\ @noo… (1978) ) NoStop | 0.405 | 1 | 1 | 100% |
Showing the top 10 of 36 scored citations.