Related papers: On Equilibrium Prices in Continuous Time
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
Economic theory has provided an estimable intuition in understanding the perplexing ideologies in law, in the areas of economic law, tort law, contract law, procedural law and many others. Most legal systems require the parties involved in…
We consider when there is absolute or unconditional convergence of series of various types of stochastic processes. These processes include differences of averages in ergodic theory and harmonic analysis, like the classical Cesaro average…
In this work, we study an equilibrium-based continuous asset pricing problem which seeks to form a price process endogenously by requiring it to balance the flow of sales-and-purchase orders in the exchange market, where a large number of…
A general formulation of stochastic thermodynamics is presented for open systems exchanging energy and particles with multiple reservoirs. By introducing a partition in terms of "macrostates" (e.g. sets of "microstates"), the consequence on…
The methods of statistical physics of open systems are used for describing the time dependence of economic characteristics (income, profit, cost, supply, currency etc.) and their correlations with each other. Nonlinear equations (analogies…
We study a phenomenological model for the continuous double auction, equivalent to two independent $M/M/1$ queues. The continuous double auction defines a continuous-time random walk for trade prices. The conditions for ergodicity of the…
In this paper we revisit the notion of the "minus logarithm of stationary probability" as a generalized potential in nonequilibrium systems and attempt to illustrate its central role in an axiomatic approach to stochastic nonequilibrium…
In this work a generalization of Onsager-Machlup's theory of time-dependent thermal fluctuations of equilibrium systems is proposed, to the case in which the system relaxes irreversibly along a non-equilibrium trajectory that can be…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
The work concentrates on relations, which are general and model independent in chaotic system, between time averages of a few (typically {\it very few}) observables. Equilibrium thermodynamics provides a guide and here is attempted to argue…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
We consider a general time-inconsistent stochastic linear-quadratic differential game. The time-inconsistency arises from the presence of quadratic terms of the expected state as well as state-dependent term in the objective functionals. We…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
A thermodynamic approach to the description of economic systems and processes is developed. It is shown that there is a deep analogy between the parameters of thermodynamic and economic systems (markets); so each thermodynamic parameter can…
We study price formation in intraday electricity markets in the presence of intermittent renewable generation. We consider the setting where a major producer may interact strategically with a large number of small producers. Using…
The distribution of price returns for a class of uncorrelated diffusive dynamics is considered. The basic assumptions are (1) that there is a "consensus" value associated with a stock, and (2) that the rate of diffusion depends on the…
A thermodynamic-like formalism is developed for superstatistical systems based on conditional entropies. This theory takes into account large-scale variations of intensive variables of systems in nonequilibrium stationary states. Ordinary…
This paper presents a comprehensive review of stochastic processes, with a particular focus on Markov chains and jump processes. The main results related to queuing systems are analyzed. Additionally, conditions that ensure the stability,…
The physical aspect of a general perturbation theory is explored. Its role as a physical principle for understanding the interaction among matter with different levels of hierarchy is appreciated. It is shown that the generic perturbation…