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Negative state prices in equilibrium can only occur if the utility of wealth is not always strictly positive. A natural assumption on utility is that it is strictly increasing in wealth in all states of nature (more money is always preferred to less money). Thus, unless you can come up with a situation in which an agent would prefer to be less wealthy and ...

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It's worth noting that prediction algorithms in the Machine Learning literature, if stated formally, usually come with the assumption that the data points are sampled i.i.d. from some distribution. This distribution is badly violated when the predictions are used to take actions in the real world that affect future data. For example, one might observe an ...

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All of these papers involve some kind of bias. @Alex pointed out rightly, they assume data is known in advance. Further model is tested on the same data on which it is being run. In reality, there is no such algorithm and strategy exist that can consistently outperform the market. Market is always very close to efficient. If someone able to find algorithm to ...

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The change of the price $P(y)$ if the yield changes from $y$ to $y+\Delta y$ is $$\frac{P(y+\Delta y) - P(y)}{P(y)} = - D \Delta y + \frac12 C \Delta y^2,$$ where $D$ is the duration and $C$ is convexity. For small $\Delta y$ the square is much smaller. Thus the duration component dominates.

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You can do that with the blotter package. We use it to reconcile our trades. It's only available on R-Forge, so see this stackoverflow question for how to install it. Run the "amzn_test" demo for an example of how to use it: library(blotter) demo(amzn_test)

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