Research
"Explore the world. Nearly everything is interesting if you go into it deeply enough. Study hard what interests you in the most undisciplined, irreverent and original manner possible."
- Richard Feynman
Journal Papers
1. Informational Updates and the Derivative Pricing Kernel [download]
AppliedMath, 2024, 4(1), 79-88.
# Areas: Asset pricing, Mathematical finance, Stochastic processes
This paper studies the problem that arises when market makers offer prices on derivative instruments even as they are learning about the underlying asset's value. The change of measure needed for pricing derivatives is now two-fold: the first is from the prior probability measure to the posterior measure, and the second is from the posterior to the risk-neutral measure. The relation between the regular pricing kernel and the pricing kernel under this two-fold change of measure is characterized.
2. Posteriors in Limited Time [download]
AppliedMath, 2022, 2(4), 700-710.
# Areas: Statistics, Computation, Game theory
This paper obtains a measure theoretic restriction that must be satisfied by a probability measure for posteriors to be computable in limited time. The restriction has important implications for models in game theory and finance that rely on a common prior.
3. Hardness of Learning in Rich Environments and Some Consequences for Financial Markets [download]
Machine Learning and Knowledge Extraction, 2021, 3(2), 467-480.
# Areas: Theoretical machine learning, Finance
This paper proves the computational infeasibility (NP-hardness) of a standard model of learning in economic theory using techniques from Probabilistic graphical models. The result has important implications for market efficiency in rich environments like high frequency markets.
4. ETFs and Systemic Risks (joint with Maureen O'Hara)
CFA Institute Research Foundation Brief, January 2020. [download]
# Areas: Asset pricing & microstructure theory
This paper focuses on the links between sudden market disruptions and the massive growth in the exchange traded funds space. We discuss the substantive issues related to ETFs and systemic risks, survey the fast-growing literature on the topic, and discuss the dilemmas facing the market regulators.
5. On Adaptive Heuristics that Converge to Correlated Equilibrium
Games, 2019, Vol 10, Issue 1, Article 6, pages 1-11. [download]
# Areas: Bounded rationality, Game theory
This paper studies path properties of adaptive heuristics that mimic the natural dynamics of play in a game and converge to the set of correlated equilibria.
6. Non-linearities in emerging financial markets: Evidence from India (joint with Rudra Sensarma),
Society & Management Review, 2013, 2(2): 165-175. [download]
# Areas: Development Finance
This paper examines chaotic dynamics and price efficiency in daily price data for four major asset classes in India. Our results do not provide evidence for chaos but indicate the presence of other non-linear deterministic processes.
Conference and Other Papers
7. Comparison of Experiments with Algorithmic Randomness [06/2024, download]
# Areas: Blackwell comparison of experiments, Algorithmic randomness, Formal learning theory
This paper uncovers new interpretations for informativeness of experiments using algorithmic randomness and formal learning theory. It is shown that the power of randomness tests in Martin-Löf's algorithmic randomness theory and the learning-theoretic ordering in formal learning mirror the ordering of experiments in Blackwell's theory.
8. Designing a Decentralized Ancillary Market for Fund-raising [Arrow Technical Reports, 2023]
# Areas: Blockchain, Market design, Auctions, Crypto
This paper lays out the theoretical principles and technical details for designing a market for raising liquidity (ancillary market) in a decentralized environment. Instead of relying on reference markets for accurate pricing (as venues like Uniswap do) the design shows how one may use use primary-market auctions along with secondary-market interventions (in the manner of Central Banks) to create a decentralized fund-raising venue.
9. Arbitrage from a Bayesian's Perspective [download]
# Areas: Asset pricing theory, Epistemic game theory
Presentations: SITE '22, SBGT '22, MFA '23
This paper builds a model of interactive belief hierarchies to derive the conditions under which judging an arbitrage opportunity requires Bayesian market participants to exercise their higher order beliefs, and obtains novel implications from higher order reasoning in markets.
10. Limit Order Market under Asymmetric Information (joint with Gideon Saar) [download]
# Areas: Asset pricing & microstructure theory, Mechanism design
Presentations: AFA '21, NASMES '21, EEA '21, MWET '21
Using a novel recursive formulation this paper develops a tractable model of limit order trading under asymmetric information that provides a number of new, empirically-testable insights about this market structure.
11. ETFs and Market Runs (joint with Maureen O’Hara) [download]
# Areas: Asset pricing & microstructure theory, Mechanism design
Presentations: AFA '21
This paper shows how the special structure of ETFs creates the possibility of a market run in very general trading circumstances by enabling a new type of concerted trade; the approach reveals the close links that market runs share with well-known economic phenomena like bank and currency runs.
12. The Logical Inevitability of Bounded Rationality [download]
# Areas: Bounded rationality, Game theory, Mathematical logic
Presentations: SBGT '19
This paper shows that no matter how powerful the reasoning of economic agents, boundedness cannot be avoided in typical interactive situations; the approach developed in the paper reveals the underlying logical unity of various forms of bounded rationality.
13. Agreement in Limited Time [download]
# Areas: Bounded rationality, Game Theory
Presentations: SBGT '19
This paper formalizes the constraint of limited time for interactive contexts and shows that the scope of Aumann's famous agree to disagree result is severely limited when agents have limited time for decision making.
14. Can ETFs Increase Market Fragility? Effect of Information Linkages in ETF Markets (joint with Maureen O’Hara) [download]
# Areas: Asset pricing & microstructure theory, Mechanism design
Presentations: WFA '17, NBER '17, NFA '18, SFSB '19
This paper demonstrates that ETFs on hard-to-trade, illiquid underlying assets have the potential to introduce fragility into the market system as well as reduce informational efficiency of underlying markets.
15. Hardness of Learning in Rich Environments and Some Consequences for Financial Markets [download]
# Areas: Asset pricing & microstructure theory, Theoretical machine learning in finance
Presentations: SBGT '18
This paper proves the computational infeasibility (NP-hardness) of a standard model of learning in economic theory using techniques from Probabilistic graphical models. The result has important implications for market efficiency in rich environments like high frequency markets.
16. Can Transparency Hurt Investors in Over-The-Counter Markets? [download]
# Areas: Asset pricing & microstructure theory, Mechanism design
Presentations: FMA '16
This paper shows that post-trade transparency regulations in over-the-counter markets – like TRACE – may have unanticipated detrimental consequences for trading.
Conferences:
American Finance Association (AFA), Annual Central Bank Conference, European Economic Association (EEA), Financial Management Association (FMA), Midwest Economic Theory (MWET), Midwest Finance Association (MFA), North American Econometric Society Summer Meetings (NASMES), National Bureau of Economic Research (NBER), Northern Finance Association (NFA), SEC Financial Stability Board (SFSB), Stanford Institute for Theoretical Economics (SITE), Stony Brook Game Theory Festival (SBGT), Western Finance Association (WFA)
Works in Progress (haven't worked on these in a while)
17. Hardness of Limit Order Pricing, and Indexed Limit Orders as a Market Design Response (joint with Gideon Saar)
# Areas: Asset pricing & microstructure theory, Theoretical machine learning in finance, Mechanism design
The paper shows that limit order markets suffer from fundamental design issues that make the computation of optimal prices a computationally intractable NP-hard problem. We suggest a tweak in the market design to overcome the issues.
18. Market Incompleteness from Market Rules
# Areas: Asset pricing & microstructure theory, Theoretical machine learning in finance, Epistemic Game theory
This paper shows how the choice of market rules can determine whether markets are complete or not – when the epistemic belief models used by market agents have holes.
Non-refereed invited publications
19. Chaos in Indian Stock Markets, Mudra IIML Journal of Finance, 2006.