Related papers: The 2006-2008 Oil Bubble and Beyond
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We show that infinite divisibility of a trading commodity leads to a self-sustained price bubble when traders use adaptive investment strategies. The adaptive strategy can be viewed as a psychological response of a trader to the situation…
The aim of this paper is to compare statistical properties of a bubble period with those of the anti-bubble period in stock markets. We investigate the statistical properties of daily data for the Nikkei 225 index in the 28-year period from…
The recent surge in valuations among AI related firms has renewed concerns that markets may be entering a new phase of speculative exuberance, especially in the technology and semiconductor sectors at the center of the AI investment wave.…
In this paper, we study the asymptotic behavior of Asian option prices in the worst case scenario under an uncertain volatility model. We give a procedure to approximate the Asian option prices with a small volatility interval. By imposing…
Between 2003 and 2015 the prices of apartments in Hong Kong (adjusted for inflation) increased by a factor of 3.8. This is much higher than in the United States prior to the so-called subprime crisis of 2007. The analysis of this…
Financial markets can be highly sensitive to news, investor sentiment, and economic indicators, leading to important asset price fluctuations. In this study we focus on crude oil, due to its crucial role in commodity markets and the global…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
Recent developments in cosmology suggest that much of the universe is in a state of explosive, accelerated expansion, called inflation. We live in a "bubble" where inflation has ended, and other bubbles with diverse properties are…
A rational bubble is a situation in which the asset price exceeds its fundamental value defined by the present discounted value of dividends in a rational equilibrium model. We discuss the recent development of the theory of rational…
The sporadic large fluctuations are seen in the stock market due to changes in fundamental parameters, technical setups, and external factors. These large fluctuations are termed as Extreme Events (EE). The EEs may be positive or negative…
The standard Hotelling model assumes that the stock of an exhaustible resource is known. We expand on the model by Arrow and Chang that introduced stochastic discoveries and for the first time completely solve such a model using impulse…
We have presented a novel technique of detecting intermittencies in a financial time series of the foreign exchange rate data of U.S.- Euro dollar(US/EUR) using a combination of both statistical and spectral techniques. This has been…
The inflationary paradigm provides a robust description of the peculiar initial conditions which are required for the success of the Hot Big Bang model of cosmology, as well as of the recent precision measurements of temperature…
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
We develop a model for point processes on the real line, where the intensity can be locally unbounded without inducing an explosion. In contrast to an orderly point process, for which the probability of observing more than one event over a…
Recent news cast doubts on London Interbank Offered Rate (LIBOR) integrity. Given its economic importance and the delay with which authorities realize about this situation, we aim to find an objective method in order to detect departures in…
The empirical literature provides mixed results on the relationship between inflation and unemployment, therefore, there is no consensus on validity and stability of the Phillips Curve. It also seems to be closely related with…