Related papers: Spiraling toward market completeness and financial…
Following the financial crisis of 2007-2008, a deep analogy between the origins of instability in financial systems and complex ecosystems has been pointed out: in both cases, topological features of network structures influence how easily…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
Post Modigliani and Miller (1958), the concept of usage of arbitrage created a permanent mark on the discourses of financial framework. The arbitrage process is largely based on information dissemination amongst the stakeholders operating…
We consider an investor who, while maximizing his/her expected utility, also compares the outcome to a reference entity. We recall the notion of personal equilibrium and show that, in a multistep, generically incomplete financial market…
We prove existence and uniqueness of stochastic equilibria in a class of incomplete continuous-time financial environments where the market participants are exponential utility maximizers with heterogeneous risk-aversion coefficients and…
This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…
Before the massive spread of computer technology, information was far from complex. The development of technology shifted the paradigm: from individuals who faced scarce and costly information to individuals who face massive amounts of…
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
We present an analysis of the price impact associated with trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the…
In the paper, the martingales and super-martingales relative to a regular set of measures are systematically studied. The notion of local regular super-martingale relative to a set of equivalent measures is introduced and the necessary and…
This paper presents a new interacting particle system and uses it as a spin model for financial market microstructure. The asymptotic analysis of this stochastic process exhibits a lower bound to the contemporaneous measurement of price and…
We point out some major drawbacks in random trading market models and propose a realistic modification which overcomes such drawbacks through `sensible trading'. We apply such trading policy in different situations: a) Agents with zero…
We study competitive equilibria in exchange economies when a continuum of goods is conflated into a finite set of commodities. The design of conflation choices affects the allocation of scarce resources among agents, by constraining trading…
We investigate whether fractal markets hypothesis and its focus on liquidity and invest- ment horizons give reasonable predictions about dynamics of the financial markets during the turbulences such as the Global Financial Crisis of late…
We show that results from the theory of random matrices are potentially of great interest to understand the statistical structure of the empirical correlation matrices appearing in the study of price fluctuations. The central result of the…
Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
This paper studies the problem of optimal investment in incomplete markets, robust with respect to stopping times. We work on a Brownian motion framework and the stopping times are adapted to the Brownian filtration. Robustness can only be…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
This paper investigates the optimal choices of financial derivatives to complete a financial market in the framework of stochastic volatility (SV) models. We introduce an efficient and accurate simulation-based method, applicable to…