Ambiguity Aversion in Algorithmic and High Frequency Trading

Crashes and high frequency trading: an evaluation of risks posed by high-speed algorithmic trading

Ambiguity and Ambiguity Aversion

Consider the following choice problem, known as “Ellsberg’s three-color urn example”, or simply the “Ellsberg Paradox” (Ellsberg [7]). An urn contains 30 red balls, and 60 green and blue balls, in unspecified proportions; subjects are asked to compare (i) a bet on a red draw vs. a bet on a green draw, and (ii) a bet on a red or blue draw vs. a bet on a green or blue draw. If the subject wins a ...

High-Frequency Trading

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Gender Differences in Risk Aversion and Ambiguity Aversion

Gender Differences in Risk Aversion and Ambiguity Aversion This paper demonstrates gender differences in risk aversion and ambiguity aversion. It also contributes to a growing literature relating economic preference parameters to psychological measures by asking whether variations in preference parameters among persons, and in particular across genders, can be accounted for by differences in pe...

Hypothesis Testing and Ambiguity Aversion∗

We study a model of non-Bayesian updating, based on the Hypothesis Testing model of Ortoleva (2012), for ambiguity averse agents. Agents ranks acts following the MaxMin Expected Utility model of Gilboa and Schmeidler (1989) and when they receive new information they update their set of priors as follows: If the information is such that all priors in the original set of priors assign to it a pro...