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The notion that economies should normally be in equilibrium is by now well-established; equally well-established is that economies are almost never precisely in equilibrium. Using a very general formulation, we show that under dynamics that…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
Geometric arbitrage theory reformulates a generic asset model possibly allowing for arbitrage by packaging all asset and their forward dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
We extend to the multi-asset case the framework of a discrete time model of a single asset financial market developed in Ghoulmie et al (2005). In particular, we focus on adaptive agents with threshold behavior allocating their resources…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
A public decision-making problem consists of a set of issues, each with multiple possible alternatives, and a set of competing agents, each with a preferred alternative for each issue. We study adaptations of market economies to this…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
In the pursuit of ever increasing efficiency and growth, our economies have evolved to remarkable degrees of complexity, with nested production processes feeding each other in order to create products of greater sophistication from less…
We introduce the notions of Collective Arbitrage and of Collective Super-replication in a discrete-time setting where agents are investing in their markets and are allowed to cooperate through exchanges. We accordingly establish versions of…
We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…
In this article we model chaotic dynamics in financial markets by treating the market price, and market makers' inventory, as anharmonic oscillators with a nonlinear coupling. The market makers' risk appetite being the key parameter that…
We show that a large effective number of commodities can be a source of equilibrium stability and uniqueness: expanding substitution opportunities strengthens aggregate substitution effects. We study finite dated-commodity exchange…
Constant price impact functions, much used in financial literature, are shown to give rise to paradoxical outcomes since they do not allow for proper predictability removal: for instance the exploitation of a single large trade whose size…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
Stochastic portfolio theory aims at finding relative arbitrages, i.e. trading strategies which outperform the market with probability one. Functionally generated portfolios, which are deterministic functions of the market weights, are an…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
We construct a continuous time model for price-mediated contagion precipitated by a common exogenous stress to the banking book of all firms in the financial system. In this setting, firms are constrained so as to satisfy a risk-weight…
Securities markets are quintessential complex adaptive systems in which heterogeneous agents compete in an attempt to maximize returns. Species of trading agents are also subject to evolutionary pressure as entire classes of strategies…
Nearly one-half of all trades in financial markets are executed by high-speed, autonomous computer programs -- a type of trading often called high-frequency trading (HFT). Although evidence suggests that HFT increases the efficiency of…
We investigate the stability of the Epstein-Zin problem with respect to small distortions in the dynamics of the traded securities. We work in incomplete market model settings, where our parametrization of perturbations allows for joint…