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Search Results: 1 - 10 of 143024 matches for " Yi-Cheng Zhang "
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Happier World with More Information
Yi-Cheng Zhang
Physics , 2001, DOI: 10.1016/S0378-4371(01)00278-3
Abstract: We explore the consequences of incomplete information in the stable marriage problem. When information capacity of the participants is increased, more favorable games are created and the quality of the matches are also better. The simple model serves as a metaphor for a world with ever more computing power that leads to more positive inter-personal interactions and of higher quality.
Modeling Market Mechanism with Evolutionary Games
Yi-Cheng Zhang
Physics , 1998,
Abstract: This is an essay solicited by Europhysics News, published in its March/April 1998 issue with slight modifications. We outline some highlights of the econophysics models, especially the so-called Minority model of competition and evolution. Even without the usual math, this essay offers an analytical solution to the Minority model, revealing some key features of the solution.
Toward a Theory of Marginally Efficient Markets
Yi-Cheng Zhang
Quantitative Finance , 1999, DOI: 10.1016/S0378-4371(99)00077-1
Abstract: Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it favorable games}, in the sense that there is a small probabilistic edge that smart speculators can exploit. We propose to identify this probability using conditional entropy concept. A perfect random walk has this entropy maximized, and departure from the maximal value represents a price history's predictability. We propose that market participants should be divided into two categories: producers and speculators. The former provides the negative entropy into the price, upon which the latter feed. We show that the residual negative entropy can never be arbitraged away: infinite arbitrage capital is needed to make the price a perfect random walk.
Why Financial Markets Will Remain Marginally Inefficient?
Yi-Cheng Zhang
Quantitative Finance , 2001,
Abstract: I summarize the recent work on market (in)efficiency, highlighting key elements why financial markets will never be made efficient. My approach is not by adding more empirical evidence, but giving plausible reasons as to where inefficiency arises and why it's not rational to arbitrage it away.
Minority games, evolving capitals and replicator dynamics
Tobias Galla,Yi-Cheng Zhang
Physics , 2009, DOI: 10.1088/1742-5468/2009/11/P11012
Abstract: We discuss a simple version of the Minority Game (MG) in which agents hold only one strategy each, but in which their capitals evolve dynamically according to their success and in which the total trading volume varies in time accordingly. This feature is known to be crucial for MGs to reproduce stylised facts of real market data. The stationary states and phase diagram of the model can be computed, and we show that the ergodicity breaking phase transition common for MGs, and marked by a divergence of the integrated response is present also in this simplified model. An analogous majority game turns out to be relatively void of interesting features, and the total capital is found to diverge in time. Introducing a restraining force leads to a model akin to replicator dynamics of evolutionary game theory, and we demonstrate that here a different type of phase transition is observed. Finally we briefly discuss the relation of this model with one strategy per player to more sophisticated Minority Games with dynamical capitals and several trading strategies per agent.
Self-Organized Critical Directed Percolation
Sergei Maslov,Yi-Cheng Zhang
Physics , 1996, DOI: 10.1016/0378-4371(95)00346-0
Abstract: We introduce and study a dynamic transport model exhibiting Self-Organized Criticality. The novel concepts of our model are the probabilistic propagation of activity and unbiased random repartition of energy among the active site and its nearest neighbors. For space dimensionality $d\geq 2$ we argue that the model is related to $d+1$ dimensional directed percolation, with time interpreted as the preferred direction.
Ground State Wave Function of the Schr?dinger Equation in a Time-Periodic Potential
Stefano Galluccio,Yi-Cheng Zhang
Physics , 1996, DOI: 10.1103/PhysRevLett.77.4118
Abstract: Using a generalized transfer matrix method we exactly solve the Schr\"odinger equation in a time periodic potential, with discretized Euclidean space-time. The ground state wave function propagates in space and time with an oscillating soliton-like wave packet and the wave front is wedge shaped. In a statistical mechanics framework our solution represents the partition sum of a directed polymer subjected to a potential layer with alternating (attractive and repulsive) pinning centers.
Emergence of Cooperation and Organization in an Evolutionary Game
Damien Challet,Yi-Cheng Zhang
Physics , 1997, DOI: 10.1016/S0378-4371(97)00419-6
Abstract: A binary game is introduced and analysed. N players have to choose one of the two sides independently and those on the minority side win. Players uses a finite set of ad hoc strategies to make their decision, based on the past record. The analysing power is limited and can adapt when necessary. Interesting cooperation and competition pattern of the society seem to arise and to be responsive to the payoff function.
Probability distribution of drawdowns in risky investments
Sergei Maslov,Yi-Cheng Zhang
Physics , 1998, DOI: 10.1016/S0378-4371(98)00416-6
Abstract: We study the risk criterion for investments based on the drawdown from the maximal value of the capital in the past. Depending on investor's risk attitude, thus his risk exposure, we find that the distribution of these drawdowns follows a general power law. In particular, if the risk exposure is Kelly-optimal, the exponent of this power law has the borderline value of 2, i.e. the average drawdown is just about to diverge
Dynamical spin-glass-like behavior in an evolutionary game
Frantisek Slanina,Yi-Cheng Zhang
Physics , 2000, DOI: 10.1016/S0378-4371(00)00500-8
Abstract: We study a new evolutionary game, where players are tempted to take part by the premium, but compete for being the first who take a specific move. Those, who manage to escape the bulk of players, are the winners. While for large premium the game is very similar to the Minority Game studied earlier, significant new behavior, reminiscent of spin glasses is observed for premium below certain level.
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