Related papers: The thermodynamic approach to market

This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…

In this paper we attempt to introduce an econophysics approach to evaluate some aspects of the risks in financial markets. For this purpose, the thermodynamical methods and statistical physics results about entropy and equilibrium states in…

This paper describes an approach to economics that is inspired by quantum computing, and is motivated by the need to develop a consistent quantum mathematical framework for economics. The traditional neoclassical approach assumes that…

Motivated by the prevalence of prediction problems in the economy, we study markets in which firms sell models to a consumer to help improve their prediction. Firms decide whether to enter, choose models to train on their data, and set…

We develop a framework based on microeconomic theory from which the ideal gas like market models can be addressed. A kinetic exchange model based on that framework is proposed and its distributional features have been studied by considering…

Statistical classical mechanics and quantum mechanics are developed and well-known theories that represent a basis for modern physics. The two described theories are well known and have been well studied. As these theories contain numerous…

In an informal way, a number of thoughts on the financial crisis 2008 are presented from a physicist's viewpoint, considering the problem as a nonergodicity transition of a spin-glass type of system. Some tentative suggestions concerning…

The purpose of this paper is to study the time average behavior of Markov chains with transition probabilities being kernels of completely continuous operators, and therefore to provide a sufficient condition for a class of Markov chains…

We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents…

We review locked inflation and we critically address phenomenological and consistency issues thathave appeared in the literature. A natural window of opportunity is found for the original scenario.Moreover, a simple way to enlarge the…

The objective of this work is twofold: to expand the depression models proposed by Tobin and analyse a supply shock, such as the Covid-19 pandemic, in this Keynesian conceptual environment. The expansion allows us to propose the evolution…

We study superreplication of European contingent claims in discrete time in a large trader model with market indifference prices recently proposed by Bank and Kramkov. We introduce a suitable notion of efficient friction in this framework,…

We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…

In this paper are made some considerations of the application of phenomenological thermodynamics in risk analysis for the transaction on financial markets, using the concept of economic entropy and the macrostate parameter introduced by us…

The study of intelligent systems explains behaviour in terms of economic rationality. This results in an optimization principle involving a function or utility, which states that the system will evolve until the configuration of maximum…

How can econophysics contribute to economics? Since the relation between basic principles of physics and economics is not established, there is no reason why physical theories should be of any value for economic theory. While economic…

The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…

A simple spin model is studied, motivated by the dynamics of traders in a market where expectation bubbles and crashes occur. The dynamics is governed by interactions which are frustrated across different scales: While ferromagnetic…

This paper characterizes equilibrium properties of a broad class of economic models that allow multiple heterogeneous agents to interact in heterogeneous manners across several markets. Our key contribution is a new theorem providing…

In this article we model chaotic dynamics in financial markets by treating the market price, and market makers' inventory, as anharmonic oscillators with a nonlinear coupling. The market makers' risk appetite being the key parameter that…