Price Interpretability of Prediction Markets: A Convergence Analysis

发布时间:2022-10-26 浏览次数:10

报告题目:Price Interpretability of Prediction Markets: A Convergence Analysis

 人:上海财经大学 高建军副教授



主办单位: 金融工程研究中心


报告摘要:Prediction markets are long known for prediction accuracy. However, there is still a lack of systematic understanding of how prediction markets aggregate information and why they work so well. This work proposes a multivariate utility (MU)-based mechanism that unifies

several existing prediction market-making schemes. Based on this mechanism, we derive convergence results for markets with myopic, risk-averse traders who repeatedly interact with the market maker. We show that the resulting limiting wealth distribution lies on the

Pareto efficient frontier defined by all market participants' utilities. With the help of this result, we establish both analytical and numerical results for the limiting price for different market models. We show that the limiting price converges to the geometric mean of agents' beliefs for exponential utility-based markets. For risk measure-based markets, we construct a

risk measure family that meets the convergence requirements and show that the limiting price can converge to a weighted power mean of agent beliefs. For markets based on hyperbolic absolute risk aversion (HARA) utilities, we show that the limiting price is also a risk-adjusted weighted power mean of agent beliefs, even though the trading order will affect the aggregation weights. We further propose an approximation scheme for the limiting price under the HARA utility family. We show through numerical experiments that our approximation scheme works well in predicting the convergent prices.



高建军博士现任上海财经大学信息管理与工程学院交叉科学研究院副教授。他本科毕业于中国科技术大学,在香港中文大学获运筹学与金融工程硕士与博士学位。他加入上海财经大学前,曾在上海交通大学担任特别研究员,美国麻省理工大学(MIT)访问研究员等。主要从事最优化理论、随机最优控制与金融工程和管理科学的交叉研究。他曾主持国家自然科学基金项目3项,在相关领域的国际权威期刊包括Operations Research, IEEE Trans. Automatic Control, Production and Operations Management, SIAM J. Optimization and Control发表30多篇论文。他的研究工作曾获得第16届金融学年会最佳论文;他与合作者协助京东开发的无人仓机器人自动送货算法获得2021年度INFORMS Franz Edelman Award决赛奖。

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