9,578 research outputs found

    A Theory of Pricing Private Data

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    Personal data has value to both its owner and to institutions who would like to analyze it. Privacy mechanisms protect the owner's data while releasing to analysts noisy versions of aggregate query results. But such strict protections of individual's data have not yet found wide use in practice. Instead, Internet companies, for example, commonly provide free services in return for valuable sensitive information from users, which they exploit and sometimes sell to third parties. As the awareness of the value of the personal data increases, so has the drive to compensate the end user for her private information. The idea of monetizing private data can improve over the narrower view of hiding private data, since it empowers individuals to control their data through financial means. In this paper we propose a theoretical framework for assigning prices to noisy query answers, as a function of their accuracy, and for dividing the price amongst data owners who deserve compensation for their loss of privacy. Our framework adopts and extends key principles from both differential privacy and query pricing in data markets. We identify essential properties of the price function and micro-payments, and characterize valid solutions.Comment: 25 pages, 2 figures. Best Paper Award, to appear in the 16th International Conference on Database Theory (ICDT), 201

    Statistical Arbitrage Mining for Display Advertising

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    We study and formulate arbitrage in display advertising. Real-Time Bidding (RTB) mimics stock spot exchanges and utilises computers to algorithmically buy display ads per impression via a real-time auction. Despite the new automation, the ad markets are still informationally inefficient due to the heavily fragmented marketplaces. Two display impressions with similar or identical effectiveness (e.g., measured by conversion or click-through rates for a targeted audience) may sell for quite different prices at different market segments or pricing schemes. In this paper, we propose a novel data mining paradigm called Statistical Arbitrage Mining (SAM) focusing on mining and exploiting price discrepancies between two pricing schemes. In essence, our SAMer is a meta-bidder that hedges advertisers' risk between CPA (cost per action)-based campaigns and CPM (cost per mille impressions)-based ad inventories; it statistically assesses the potential profit and cost for an incoming CPM bid request against a portfolio of CPA campaigns based on the estimated conversion rate, bid landscape and other statistics learned from historical data. In SAM, (i) functional optimisation is utilised to seek for optimal bidding to maximise the expected arbitrage net profit, and (ii) a portfolio-based risk management solution is leveraged to reallocate bid volume and budget across the set of campaigns to make a risk and return trade-off. We propose to jointly optimise both components in an EM fashion with high efficiency to help the meta-bidder successfully catch the transient statistical arbitrage opportunities in RTB. Both the offline experiments on a real-world large-scale dataset and online A/B tests on a commercial platform demonstrate the effectiveness of our proposed solution in exploiting arbitrage in various model settings and market environments.Comment: In the proceedings of the 21st ACM SIGKDD international conference on Knowledge discovery and data mining (KDD 2015

    Intra-exchange Cryptocurrency Arbitrage Bot

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    Cryptocurrencies are defined as a digital currency in which encryption techniques are utilized to regulate generation of units of currency and verify the transfer of funds, independent of a central governing body such as a bank. Due to the large number of cryptocurrencies currently available, there inherently exists many price discrepancies due to market inefficiencies. Market inefficiencies occur when the price of assets do not reflect their true value. In fact, these types of pricing discrepancies exist in other financial markets, including fiat currency exchanges and stock exchanges. However, these discrepancies are more significant in the cryptocurrency domain due to the low levels of government regulation, higher amounts of speculation, and human behaviors driven by investors seeking profit. These types of pricing discrepancies can be eliminated to some extent by executing arbitrages, which are defined as a sequences of trades beginning and ending with the same asset which result in more of that asset at the end of the trading sequence. Through executing arbitrages, the market should become more efficient. This project was an attempt to execute intra-exchange arbitrage on the well- known cryptocurrency exchange Binance and generate profit, and as a side effect make the cryptocurrency exchange market more fluid. Although the project did not record phenomenal profits, it did successfully generate several hundred dollars over the course of several months, independent of market fluctuations

    Pervasive Gaming: Testing Future Context Aware Applications

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    Over the last few years, many discussions have centred around the issue of interconnection rates and their economic impact on the market. Interconnection charging in Europe is still based mainly on the calling party pays (CPP) principle combined with element based charging (EBC). Due to the convergence of the classical PSTN/ISDN and the IP world to next generation networks (NGN), the different charging principles and systems are being reviewed to determine the optimal solution for the future. In its working program for the year 2008, the Austrian Regulatory Authority (RTR) launched an industry working group on charging principles and systems for wholesale services. This paper highlights some of the central issues of the discussions that have taken place and contains the authors’ views and conclusions .1 Further, the paper identifies possible charging systems, as well as economic assessment criteria for these systems and how the different charging systems may be evaluated with respect to those criteria. Regarding the usefulness of industry working groups, the work has shown that these lead to a higher degree of transparency between regulator and market players as well as a better understanding between the market players themselves. The main drawback is that working groups are time consuming and that it is almost impossible to agree on meaningful outcomes. Regarding the assessment of the charging models it was possible to derive a set of 10 criteria according to which charging systems can be evaluated. There was a rather broad consensus on the delineation of charging models as well as the economic criteria. When it comes to the results of the evaluation, the discussions brought forward very controversial views amongst the participants. No common views could be achieved on which the charging model fulfills the defined criteria in the best manner.Interconnection, NGN, charging principles, CPP, Bill&Keep.

    Some economic remarks on arbitrage theory

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    Today's primarily mathematically oriented arbitrage theory does not address some economically important aspects of pricing. These are, first, the implicit conjecture that there is 'the' price of a portfolio, second, the exact formulation of no-arbitrage, price reproduction, and positivity of the pricing rule under short selling constraints, third, the explicit assumption of a nonnegative riskless interest rate, and fourth, the connection between arbitrage theory (that is almost universal pricing theory) and special pricing theories. Our article proposes the following answers to the above issues: The first problem can be solved by introducing the notion of 'physical' no-arbitrage, the second one by formulating the concept of 'actively' traded portfolios (that is non-dominated portfolios) and by requiring that there is a minimum price for actively traded portfolios and therefore for every admissible portfolio, and the third one by combining the 'invisible' asset 'cash' with the idea of actively traded portfolios - a riskless asset with a rate of return less than zero can never be actively traded in the presence of cash. Finally, the connection between arbitrage theory and special pricing theories ('law-of-one-price-oriented' and 'utility-oriented' pricing) consists in the fact that special pricing theories merely concretize arbitrage theory using different assumptions. --

    Multi-keyword multi-click advertisement option contracts for sponsored search

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    In sponsored search, advertisement (abbreviated ad) slots are usually sold by a search engine to an advertiser through an auction mechanism in which advertisers bid on keywords. In theory, auction mechanisms have many desirable economic properties. However, keyword auctions have a number of limitations including: the uncertainty in payment prices for advertisers; the volatility in the search engine's revenue; and the weak loyalty between advertiser and search engine. In this paper we propose a special ad option that alleviates these problems. In our proposal, an advertiser can purchase an option from a search engine in advance by paying an upfront fee, known as the option price. He then has the right, but no obligation, to purchase among the pre-specified set of keywords at the fixed cost-per-clicks (CPCs) for a specified number of clicks in a specified period of time. The proposed option is closely related to a special exotic option in finance that contains multiple underlying assets (multi-keyword) and is also multi-exercisable (multi-click). This novel structure has many benefits: advertisers can have reduced uncertainty in advertising; the search engine can improve the advertisers' loyalty as well as obtain a stable and increased expected revenue over time. Since the proposed ad option can be implemented in conjunction with the existing keyword auctions, the option price and corresponding fixed CPCs must be set such that there is no arbitrage between the two markets. Option pricing methods are discussed and our experimental results validate the development. Compared to keyword auctions, a search engine can have an increased expected revenue by selling an ad option.Comment: Chen, Bowei and Wang, Jun and Cox, Ingemar J. and Kankanhalli, Mohan S. (2015) Multi-keyword multi-click advertisement option contracts for sponsored search. ACM Transactions on Intelligent Systems and Technology, 7 (1). pp. 1-29. ISSN: 2157-690

    Option-pricing in incomplete markets: the hedging portfolio plus a risk premium-based recursive approach

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    Consider a non-spanned security CTC_{T} in an incomplete market. We study the risk/return tradeoffs generated if this security is sold for an arbitrage-free price C0^\hat{C_{0}} and then hedged. We consider recursive "one-period optimal" self-financing hedging strategies, a simple but tractable criterion. For continuous trading, diffusion processes, the one-period minimum variance portfolio is optimal. Let C0(0)C_{0}(0) be its price. Self-financing implies that the residual risk is equal to the sum of the one-period orthogonal hedging errors, tTYt(0)er(Tt)\sum_{t\leq T} Y_{t}(0) e^{r(T -t)}. To compensate the residual risk, a risk premium ytΔty_{t}\Delta t is associated with every YtY_{t}. Now let C0(y)C_{0}(y) be the price of the hedging portfolio, and tT(Yt(y)+ytΔt)er(Tt)\sum_{t\leq T}(Y_{t}(y)+y_{t}\Delta t)e^{r(T-t)} is the total residual risk. Although not the same, the one-period hedging errors Yt(0)andYt(y)Y_{t}(0) and Y_{t}(y) are orthogonal to the trading assets, and are perfectly correlated. This implies that the spanned option payoff does not depend on y. Let C0^C0(y)\hat{C_{0}}-C_{0}(y). A main result follows. Any arbitrage-free price, C0^\hat{C_{0}}, is just the price of a hedging portfolio (such as in a complete market), C0(0)C_{0}(0), plus a premium, C0^C0(0)\hat{C_{0}}-C_{0}(0). That is, C0(0)C_{0}(0) is the price of the option's payoff which can be spanned, and C0^C0(0)\hat{C_{0}}-C_{0}(0) is the premium associated with the option's payoff which cannot be spanned (and yields a contingent risk premium of sum ytΔy_{t}\Deltater(Tt) e^{r(T-t)} at maturity). We study other applications of option-pricing theory as well
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