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Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
Many complex systems exhibit extreme events far more often than expected for a normal distribution. This work examines how self-similar bursts of activity across several orders of magnitude can emerge from first principles in systems that…
A taxonomy of large financial crashes proposed in the literature locates the burst of speculative bubbles due to endogenous causes in the framework of extreme stock market crashes, defined as falls of market prices that are outlier with…
We simulate a simplified version of the price process including bubbles and crashes proposed in Kreuser and Sornette (2018). The price process is defined as a geometric random walk combined with jumps modelled by separate, discrete…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
We study a generic model for self-referential behaviour in financial markets, where agents attempt to use some (possibly fictitious) causal correlations between a certain quantitative information and the price itself. This correlation is…
This paper presents a model of capital accumulation for a large number of heterogenous producer-consumers in an exchange space in which interactions depend on agents' positions. Each agent is described by his production, consumption, stock…
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…
Popular hypotheses about the origins of collective adaptation are related to two basic behaviours: protection from predators and a combined search for food resources. Among the anti-predator explanations, the predator confusion hypothesis…
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…
This paper investigates the interplay between information diffusion in social networks and its impact on financial markets with an Agent-Based Model (ABM). Agents receive and exchange information about an observable stochastic component of…
The dual crises of the sub-prime mortgage crisis and the global financial crisis has prompted a call for explanations of non-equilibrium market dynamics. Recently a promising approach has been the use of agent based models (ABMs) to…
We propose a Statistical-Mechanics inspired framework for modeling economic systems. Each agent composing the economic system is characterized by a few variables of distinct nature (e.g. saving ratio, expectations, etc.). The agents…
We consider open multi-agent systems. Unlike the systems usually studied in the literature, here agents may join or leave while the process studied takes place. The system composition and size evolve thus with time. We focus here on systems…