Publications [#302361] of Rong Ge

Papers Published

1. Arora, S; Barak, B; Brunnermeier, M; Ge, R, Computational complexity and information asymmetry in financial products, Communications of the ACM, vol. 54 no. 5 (May, 2011), pp. 101-107, Association for Computing Machinery (ACM), ISSN 0001-0782 [doi]
   (last updated on 2026/01/18)

   Abstract:
   Computational complexity studies intractable problems like NP-complete problems, which are conjectured to require more computational resources than can be provided by the fastest computers. The intractability of this problem leads to a concrete realization of information asymmetry. Computational complexity immediately implies the existence of hard-to-price derivatives, albeit unnatural ones. Consider for example a derivative whose contract contains a 10,000 digit integer n and has a nonzero payoff if the unemployment rate next January, when rounded to the nearest integer, is the last digit of a factor of n. Computational complexity can be related to the bounded rationality concept in economics. A seller who knows he has a non-lemon would be unwilling to sell for $800, and would therefore withdraw from the market. The market would be left only with lemons, and knowing this, buyers would refuse to buy any car.