Information Dissemination and Aggregation in Asset Markets with Simple Intelligent Traders

Various studies of asset markets have shown that traders are capable of learning and transmitting information through prices in many situations. In this paper we replace human traders with intelligent software agents in a series of simulated markets. Using these simple learning agents, we are able to replicate several features of the experiments with human subjects, regarding (1) dissemination of information from informed to uninformed traders, and (2) aggregation of information spread over different traders.

Geometric Structure of the Adaptive Controller of the Human Arm

The objects with which the hand interacts with may significantly change the dynamics of the arm. How does the brain adapt control of arm movements to this new dynamic? We show that adaptation is via composition of a model of the task's dynamics. By exploring generalization capabilities of this adaptation we infer some of the properties of the computational elements with which the brain formed this model: the elements have broad receptive fields and encode the learned dynamics as a map structured in an intrinsic coordinate system closely related to the geometry of the skeletomusculature. The low--level nature of these elements suggests that they may represent asset of primitives with which a movement is represented in the CNS.

A Nonparametric Approach to Pricing and Hedging Derivative Securities via Learning Networks

We propose a nonparametric method for estimating derivative financial asset pricing formulae using learning networks. To demonstrate feasibility, we first simulate Black-Scholes option prices and show that learning networks can recover the Black-Scholes formula from a two-year training set of daily options prices, and that the resulting network formula can be used successfully to both price and delta-hedge options out-of-sample. For comparison, we estimate models using four popular methods: ordinary least squares, radial basis functions, multilayer perceptrons, and projection pursuit. To illustrate practical relevance, we also apply our approach to S&P 500 futures options data from 1987 to 1991.