We introduce a behavioral model of managerial compensation, in context of labor market mobility, for regulators who design mechanism(s) that affect firm capital structure, and then cash in later by exercising a career option to join firm management or a consultancy. Our model derives several new results. First, we prove that regulator signals embedded in capital structure induce discrete regimes for the firm's pricing strategy. Agency cost comprises regulator substitution of firm profit for con

We introduce a representation theory for risk operations on locally compact groups in a partition of unity on a topological manifold for Markowitz-Tversky-Kahneman (MTK) reference points. We identify (1) risk torsion induced by the flip rate for risk averse and risk seeking behavior, and (2) a structure constant or coupling of that torsion in the paracompact manifold. The risk torsion operator extends by continuity to prudence and maxmin expected utility (MEU) operators, as well as other behavio

This paper extends the solution space for decision theory by introducing a behavioural operator that (1) transforms probability domains, and (2) generates sample paths for confidence from catalytic fuzzy or ambiguous sources. First, we prove that average sample paths for confidence/sentiment, generated from within and across source sets, differ. So conjugate priors should be used to mitigate the difference. Second, we identify loss aversion as the source of Langevin type friction that explains t

We introduce a trade strategy representation theorem for performance measurement and portable alpha in high frequency trading, by embedding a robust trading algorithm that describe portfolio manager market timing behavior, in a canonical multifactor asset pricing model. First, we present a spectral test for market timing based on behavioral transformation of the hedge factors design matrix. Second, we find that the typical trade strategy process is a local martingale with a background driving Br

We introduce a model of managerial compensation, in context of labor market mobility, for regulators who design mechanism(s) that affect firm capital structure, and then cash in later by exercising a career option to join management or a consultancy. Examples of this "revolving door' mobility include but is not limited to, politicians who become lobbyists; insurance commissioners who become insurance executives; IRS and government procurement contract officials who become consultants; corporate

This note is based on a recent confidence index introduced in the context of compensating probability factors for deviations of subjective probability measures from equivalent martingale measures. The index is adjusted for loss gain probability spreads, and it explains momentum in confidence. We introduce a confidence matrix operator which shows how a subject transforms gain domain into fear of loss. So she is loss averse or risk averse. By contrast, the adjoint confidence matrix operator is an

This paper contributes to the literature on decision making under risk and uncertainty by attaching a weighted probability space to outcome space. Thereby inducing a commutative map of behavior on prospect theory's function space. We endow that space with a psychological metric space, and a time dependent probability density function with kurtosis controlled by a subject's strength of preference. Several new results are derived on that behavioral topological apparatus. First, we prove that gambl

In this paper we present a simple closed form stock price formula, which captures empirical regularities of high frequency trading (HFT), based on two factors: (1) exposure to hedge factor; and (2) hedge factor volatility. For instance, this formula allows us to use exposure to and volatility of E-mini contracts to predict movements in an underlying index. So the stock price is not determined by fundamental valuation. The parsimonious formula, derived from synthesis of recent continuous time HF

We present conditions under which positive alpha exists in the realm of active portfolio management - in contrast to the controversial result in (Jarrow (2010) which implicates delegated portfolio management by surmising that positive alphas are illusionary. Specifically, we show that the critical assumption used in Jarrow (2010, pg. 20), to derive the illusionary alpha result, is based on a zero set for CAPM with Lebesgue measure zero. So conclusions based on the assumption may well have proba

Probabilistic preference models predict that a subject makes different choices with different probabilities when repeatedly faced with the same or similar situation(s). However, they do not explain why choice is probabilistic. This paper provides an explanation. First, we prove that a gamble is a statistical ensemble or sample function of a random field with canonical Luce-Gibbs measure. And we employ entropy measures of uncertainty to characterize the underlying function space. Second, we find