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An axiomatic approach to macroeconomics based on the mathematical structure of thermodynamics is presented. It deduces relations between aggregate properties of an economy, concerning quantities and flows of goods and money, prices and the…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
We present a novel agent-based approach to simulating an over-the-counter (OTC) financial market in which trades are intermediated solely by market makers and agent visibility is constrained to a network topology. Dynamics, such as changes…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
This paper studies learning in markets with aggregate uncertainty about whether trade is efficient. A long-lived seller offers prices to buyers, who are short-lived and arrive according to a Poisson process. A hidden state determines…
We present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control…
Trading pressure from one asset can move the price of another, a phenomenon referred to as cross impact. Using tick-by-tick data spanning 5 years for 500 assets listed in the United States, we identify the features that make cross-impact…
The analysis of high-frequency financial data is often impeded by the presence of noise. This article is motivated by intraday return data in which market microstructure noise appears to be rough, that is, best captured by a continuous-time…
The transient fluctuation of the prosperity of firms in a network economy is investigated with an abstract stochastic model. The model describes the profit which firms make when they sell materials to a firm which produces a product and the…
Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
We study the dynamics of exchange value in a system composed of many interacting agents. The simple model we propose exhibits cooperative emergence and collapse of global value for individual goods. We demonstrate that the demand that…
In this work, we present a continuous-time large-population game for modeling market microstructure betweentwo consecutive trades. The proposed modeling framework is inspired by our previous work [23]. In this framework, the Limit Order…
We study a stochastic model for the diffusion of competing opinions in a population composed of three types of agents: trend-followers, opposers, and indifferent individuals. The decision dynamics are driven by reinforcement mechanisms,…
We study the Proportional Response dynamic in exchange economies, where each player starts with some amount of money and a good. Every day, the players bring one unit of their good and submit bids on goods they like, each good gets…
The programmable and composable nature of smart contract protocols has enabled the emergence of novel market structures and asset classes that are architecturally frictional to implement in traditional financial paradigms. This fluidity has…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
We study procurement design when the buyer is uncertain about both the value of the good and the seller's cost. The buyer has a conjectured model but does not fully trust it. She first identifies mechanisms that maximize her worst-case…