Related papers: How sensitive are equilibrium pricing models to re…
In this paper, simple mathematical models from Control Theory are applied to three very important economic paradigms, namely (a) minimum wages in self-regulating markets, (b) market-versus-true values and currency rates, and (c) government…
Prediction markets are designed to elicit information from multiple agents in order to predict (obtain probabilities for) future events. A good prediction market incentivizes agents to reveal their information truthfully; such incentive…
This work suggests modifications to a previously introduced class of heterogeneous agent models that allow for the inclusion of different types of agent motivations and behaviours in a unified way. The agents operate within a highly…
Based on criteria of mathematical simplicity and consistency with empirical market data, a model with volatility driven by fractional noise has been constructed which provides a fairly accurate mathematical parametrization of the data.…
Behavior of systems that are functions of anticipated behavior of other systems, whose own behavior is also anticipatory but homeostatic and determined by hierarchical ordering, which changes over time, of sets of possible environments that…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We propose a tractable unified framework to study the evolution and interaction of model-misspecification concerns and complexity aversion in repeated decision problems. This aims to capture environments where decision makers worry that…
We study the relation between the trading behavior of agents and volatility in toy markets of adaptive inductively rational agents. We show that excess volatility, in such simplified markets, arises as a consequence of {\em i)} the neglect…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
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…
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
The ability to construct a realistic simulator of financial exchanges, including reproducing the dynamics of the limit order book, can give insight into many counterfactual scenarios, such as a flash crash, a margin call, or changes in…
The modeling of financial markets as disequilibrium models by ordinary differential equations has become a popular modeling tool. One famous example of such a model is the Beja-Goldman model(The Journal of Finance, 1980) which we consider…
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary…
Model approximations are common practice when estimating structural or quasi-structural models. The paper considers the econometric properties of estimators that utilize projections to reimpose information about the exact model in the form…
We investigate how asymmetric information affects equilibrium price formation in an economy with many interacting agents. Motivated by a finite-player model with two populations of asymmetrically informed agents, we study its mean-field…
The high-order complexity of human behaviour is likely the root cause of extreme difficulty in financial market projections. We consider that behavioural simulation can unveil systemic dynamics to support analysis. Simulating diverse human…
We present an overview of some representative Agent-Based Models in Economics. We discuss why and how agent-based models represent an important step in order to explain the dynamics and the statistical properties of financial markets beyond…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…