Related papers: A simple model for asset price bubble formation an…
In this paper we further extend the optimal bubble riding model proposed by Tangpi and Wang by allowing for price-dependent entry times. Agents are characterized by their individual entry threshold that represents their belief in the…
We study and generalize in various ways the model of rational expectation (RE) bubbles introduced by Blanchard and Watson in the economic literature. First, bubbles are argued to be the equivalent of Goldstone modes of the fundamental…
In this study, we investigate asset price bubbles in a discrete-time, discrete-state market under model uncertainty and short sales prohibitions. Building on a new fundamental theorem of asset pricing and a superhedging duality in this…
We define a financial bubble as a period of unsustainable growth, when the price of an asset increases ever more quickly, in a series of accelerating phases of corrections and rebounds. More technically, during a bubble phase, the price…
A simple Ising spin model which can describe the mechanism of price formation in financial markets is proposed. In contrast to other agent-based models, the influence does not flow inward from the surrounding neighbors to the center site,…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
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…
The present work is devoted to a model of bubble collapse in a Newtonian viscous liquid caused by an initial bubble wall motion. The obtained bubble dynamics described by an analytic solution significantly depends on the liquid and bubble…
A general theory of innovation and progress in human society is outlined, based on the combat between two opposite forces (conservatism/inertia and speculative herding "bubble" behavior). We contend that human affairs are characterized by…
A microscopic model of financial markets is considered, consisting of many interacting agents (spins) with global coupling and discrete-time thermal bath dynamics, similar to random Ising systems. The interactions between agents change…
Economic and financial time series can feature locally explosive behavior when a bubble is formed. The economic or financial bubble, especially its dynamics, is an intriguing topic that has been attracting longstanding attention. To…
Proving the existence of speculative financial bubbles even a posteriori has proven exceedingly difficult so anticipating a speculative bubble ex ante would at first seem an impossible task. Still as illustrated by the recent turmoil in…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
We highlight a very simple statistical tool for the analysis of financial bubbles, which has already been studied in [1]. We provide extensive empirical tests of this statistical tool and investigate analytically its link with stocks…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
We endorse the idea, suggested in recent literature, that BitCoin prices are influenced by sentiment and confidence about the underlying technology; as a consequence, an excitement about the BitCoin system may propagate to BitCoin prices…
Social trends or fashions are spontaneous collective decisions made by large portions of a community, often without an apparent good reason. The spontaneous formation of trends provides a well documented mechanism for the spread of…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…