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Weiping Wu

Publications and source records attributed to Weiping Wu.

4 recordsLinked to original sources

Price Interpretability of Prediction Markets: A Convergence Analysis

Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to their remarkable efficacy. We propose a novel multivariate utility (MU) based mechanism that unifies several existing automated market-making schemes. Using this mechanism, we establish the convergence results for markets comprised of risk-averse traders who have heterogeneous beliefs and repeatedly interact with the market maker. We demonstrate that the resulting limiting wealth distribution aligns with the Pareto efficient frontier defined by the utilities of all market participants. With the help of this result, we establish analytical and numerical results for the limiting price in different market models. Specifically, we show that the limiting price converges to the geometric mean of agent beliefs in exponential utility-based markets. In risk-measure-based markets, we construct a family of risk measures that satisfy the convergence criteria and prove that the price can converge to a unique level represented by the weighted power mean of agent beliefs. In broader markets with Constant Relative Risk Aversion (CRRA) utilities, we reveal that the limiting price can be characterized by systems of equations that encapsulate agent beliefs, risk parameters, and wealth. Despite the potential impact of traders' trading sequences on the limiting price, we establish a price invariance result for markets with a large trader population. Using this result, we propose an efficient approximation scheme for the limiting price.

q-fin.TR

Mean-variance hybrid portfolio optimization with quantile-based risk measure

This paper addresses the importance of incorporating various risk measures in portfolio management and proposes a dynamic hybrid portfolio optimization model that combines the spectral risk measure and the Value-at-Risk in the mean-variance formulation. By utilizing the quantile optimization technique and martingale representation, we offer a solution framework for these issues and also develop a closed-form portfolio policy when all market parameters are deterministic. Our hybrid model outperforms the classical continuous-time mean-variance portfolio policy by allocating a higher position of the risky asset in favorable market states and a less risky asset in unfavorable market states. This desirable property leads to promising numerical experiment results, including improved Sortino ratio and reduced downside risk compared to the benchmark models.

q-fin.PM

Optimal Control of Constrained Stochastic Linear-Quadratic Model with Applications

This paper studies a class of continuous-time scalar-state stochastic Linear-Quadratic (LQ) optimal control problem with the linear control constraints. Applying the state separation theorem induced from its special structure, we develop the explicit solution for this class of problem. The revealed optimal control policy is a piece-wise affine function of system state. This control policy can be computed efficiently by solving two Riccati equations off-line. Under some mild conditions, the stationary optimal control policy can be also derived for this class of problem with infinite horizon. This result can be used to solve the constrained dynamic mean-variance portfolio selection problem. Examples shed light on the solution procedure of implementing our method.

q-fin.PM

Nano-optomechanical Nonlinear Dielectric Metamaterials

By harnessing the resonant nature of localized electromagnetic modes in a nanostructured silicon membrane, an all-dielectric metamaterial can act as nonlinear medium at optical telecommunications wavelengths. We show that such metamaterials provide extremely large optomechanical nonlinearities, operating at intensities of only a few μW per unit cell and modulation frequencies as high as 152 MHz, thereby offering a path to fast, compact and energy efficient all-optical metadevices.

physics.optics