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Game theoretic equilibria are mathematical expressions of rationality. Rational agents are used to model not only humans and their software representatives, but also organisms, populations, species and genes, interacting with each other and…
A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…
The analogies between economics and classical mechanics can be extended from constrained optimization to constrained dynamics by formalizing economic (constraint) forces and economic power in analogy to physical (constraint) forces in…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
Many empirical studies estimate causal effects in environments where economic units interact through spatial or network connections. In such settings, outcomes are jointly determined, and treatment induced shocks propagate across…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
Network economics is the study of a rich class of equilibrium problems that occur in the real world, from traffic management to supply chains and two-sided online marketplaces. In this paper we explore causal inference in network economics,…
In this chapter, an input-output economic model with multiple interactive economic systems is considered. The model captures the multi-dimensional nature of the economic sectors or industries in each economic system, the interdependencies…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…
We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism.…
We present a dynamical model for the price evolution of financial assets. The model is based in a two level structure. In the first stage one finds an agent-based model that describes the present state of the investors' beliefs,…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
Positive feedback trading, which buys when prices rise and sells when prices fall, has long been criticized for being destabilizing as it moves prices away from the fundamentals. Motivated by the relationship between positive feedback…
This article is a follow-up of a short essay that appeared in Nature 455, 1181 (2008) [arXiv:0810.5306]. It has become increasingly clear that the erratic dynamics of markets is mostly endogenous and not due to the rational processing of…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
Noncooperative games with uncertain payoffs have been classically studied under the expected-utility theory framework, which relies on the strong assumption that agents behave rationally. However, simple experiments on human decision makers…
Empirical economists are often deterred from the application of fixed effects binary choice models mainly for two reasons: the incidental parameter problem and the computational challenge even in moderately large panels. Using the example…
Designing a financial market that works well is very important for developing and maintaining an advanced economy, but is not easy because changing detailed rules, even ones that seem trivial, sometimes causes unexpected large impacts and…
Statistics is sometimes described as the science of reasoning under uncertainty. Statistical models provide one view of this uncertainty, but what is frequently neglected is the 'invisible' portion of uncertainty: that assumed not to exist…