Related papers: The Minimal Model of Financial Complexity
Wealth inequality is an important matter for economic theory and policy. Ongoing debates have been discussing recent rise in wealth inequality in connection with recent development of active financial markets around the world. Existing…
We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model synchronization effects, which generate large fluctuations in returns, can arise either from an…
Investors try to predict returns of financial assets to make successful investment. Many quantitative analysts have used machine learning-based methods to find unknown profitable market rules from large amounts of market data. However,…
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 present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
Financial markets are a classical example of complex systems as they comprise many interacting stocks. As such, we can obtain a surprisingly good description of their structure by making the rough simplification of binary daily returns.…
Firms compete for clients, creating distributions of market shares ranging from domination by a few giant companies to markets in which there are many small firms. These market structures evolve in time, and may remain stable for many years…
We propose a novel kinetic exchange model differing from previous ones in two main aspects. First, the basic dynamics is modified in order to represent economies where immediate wealth exchanges are carried out, instead of reshufflings or…
Multiplicative random cascade model naturally reproduces the intermittency or multifractality, which is frequently shown among hierarchical complex systems such as turbulence and financial markets. As described herein, we investigate the…
We define and investigate a property of mechanisms that we call "strategic simplicity," and that is meant to capture the idea that, in strategically simple mechanisms, strategic choices require limited strategic sophistication. We define a…
Efforts to apply economic complexity to identify diversification opportunities often rely on diagrams comparing the relatedness and complexity or products, technologies, or industries. Yer, the use of these diagrams is not based on…
We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend…
We consider a financial network represented at any time instance by a random liability graph which evolves over time. The agents connect through credit instruments borrowed from each other or through direct lending, and these create the…
A self-organized model with social percolation process is proposed to describe the propagations of information for different trading ways across a social system and the automatic formation of various groups within market traders. Based on…
An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the…
We describe a bottom-up framework, based on the identification of appropriate order parameters and determination of phase diagrams, for understanding progressively refined agent-based models and simulations of financial markets. We…
We investigate hierarchical structure in various complex systems according to Minimum Spanning Tree methods. Firstly, we investigate stock markets where the graphis obtained from the matrix of correlations coefficient computed between all…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
We consider a sequential decision-making setting where, at every round $t$, a market maker posts a bid price $B_t$ and an ask price $A_t$ to an incoming trader (the taker) with a private valuation for one unit of some asset. If the trader's…
Two markets should be considered isomorphic if they are financially indistinguishable. We define a notion of isomorphism for financial markets in both discrete and continuous time. We then seek to identify the distinct isomorphism classes,…