KAUST's Stochastic Numerics Research Group is developing methods for pricing European options. Their approach, detailed in an upcoming Journal of Computational Finance article, focuses on systematically tuning parameters to achieve accuracy while minimizing computational effort. The goal is to enable automated computation of fair prices for options contracts, similar to how insurance companies determine premiums. Why it matters: This research advances computational finance in the region, potentially improving risk management and investment strategies.
KAUST Ph.D. student Chiheb Ben Hammouda won the best poster award at the Society for Industrial and Applied Mathematics Conference on Financial Mathematics & Engineering (FM19) for his work on option pricing under the rough Bergomi model. The winning poster, titled "Hierarchical adaptive sparse grids and quasi-Monte Carlo for option pricing under the rough Bergomi model," details research carried out under the supervision of KAUST Professor Raul Tempone. The research group designed new efficient numerical methods for pricing derivatives under the rough Bergomi model by combining smoothing techniques. Why it matters: This award highlights KAUST's growing expertise in financial mathematics and its contribution to solving complex problems in the field using advanced numerical methods.
This paper introduces DaringFed, a novel dynamic Bayesian persuasion pricing mechanism for online federated learning (OFL) that addresses the challenge of two-sided incomplete information (TII) regarding resources. It formulates the interaction between the server and clients as a dynamic signaling and pricing allocation problem within a Bayesian persuasion game, demonstrating the existence of a unique Bayesian persuasion Nash equilibrium. Evaluations on real and synthetic datasets demonstrate that DaringFed optimizes accuracy and convergence speed and improves the server's utility.
This paper presents a reinforcement learning framework for optimizing energy pricing in peer-to-peer (P2P) energy systems. The framework aims to maximize the profit of all components in a microgrid, including consumers, prosumers, the service provider, and a community battery. Experimental results on the Pymgrid dataset demonstrate the approach's effectiveness in price optimization, considering the interests of different components and the impact of community battery capacity.
Xi Chen from NYU Stern gave a talk at MBZUAI on digital privacy in personalized pricing using differential privacy. The talk also covered research in Web3 and decentralized finance, including delta hedging liquidity positions on Uniswap V3. Chen highlighted open problems in decentralized finance during the presentation. Why it matters: The talk suggests MBZUAI's interest in exploring the intersection of AI, privacy, and blockchain technologies, reflecting growing trends in data protection and decentralized systems.
Munther Dahleh from MIT gave a talk on information design under uncertainty, focusing on the challenges of creating an information marketplace. The talk addressed the externality faced by firms when information is allocated to competitors, and considered two models for this externality. The presentation included mechanisms for both models and highlighted the impact of competition on the revenue collected by the seller. Why it matters: The research advances understanding of information markets and mechanism design, relevant to the growing data economy in the GCC region.
This article discusses approximating a high-dimensional distribution using Gaussian variational inference by minimizing Kullback-Leibler divergence. It builds upon previous research and approximates the minimizer using a Gaussian distribution with specific mean and variance. The study details approximation accuracy and applicability using efficient dimension, relevant for analyzing sampling schemes in optimization. Why it matters: This theoretical research can inform the development of more efficient and accurate AI algorithms, particularly in areas dealing with high-dimensional data such as machine learning and data analysis.
This article discusses conscious investing and its potential in the Middle East, particularly in light of unprecedented market conditions. It argues that investments should align with values and aim for positive global impact, moving beyond solely maximizing shareholder value. Conscious investing can be as profitable as traditional investing while addressing social and environmental challenges. Why it matters: The piece advocates for integrating ethical considerations into investment strategies within the region, which could lead to more sustainable and socially responsible economic development.