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The aim of this paper is to reemphasize the money theory of exchange which is centered on the function of exchange medium of money, and make a contribution towards linearization of the quantity equation of exchange. A dynamical quantity…
In general it is not clear which kind of information is supposed to be used for calculating the fair value of a contingent claim. Even if the information is specified, it is not guaranteed that the fair value is uniquely determined by the…
Financial institutions have to allocate so-called "economic capital" in order to guarantee solvency to their clients and counter parties. Mathematically speaking, any methodology of allocating capital is a "risk measure", i.e. a function…
This paper establishes the existence of equilibrium in an economy with production and a continuum of consumers, each of whose incomplete and price-dependent preferences are defined on commodities they may consider deleterious, bads which…
This paper proposes a change in perspective on the ``transformation of values'' problem: from ``searching for a single constant solution'' to ``characterizing the allocation space under objective constraints imposed by the physical…
This paper studies an optimal investment and consumption problem with heterogeneous consumption of basic and luxury goods, together with the choice of time for retirement. The utility for luxury goods is not necessarily a concave function.…
I show that if the capital accumulation dynamics is stochastic a new term, in addition to that given by accounting prices, has to be introduced in order to derive a correct estimate of the genuine wealth of an economy. In a simple model…
A financial market is a system resulting from the complex interaction between participants in a closed economy. We propose a minimal microscopic model of the financial market economy based on the real economy's symmetry constraint and…
This is an invited article for the Discussion and Debate special issue of The European Physical Journal Special Topics on the subject "Can Economics Be a Physical Science?" The first part of the paper traces the personal path of the author…
The algebra of transactions as fundamental measurements is constructed on the basis of the analysis of their properties and represents an expansion of the Boolean algebra. The notion of the generalized economic measurements of the economic…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
We study a single risky financial asset model subject to price impact and transaction cost over an infinite horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in fixed…
This paper investigates the application of Simulated Bifurcation algorithms to approximate optimal asset allocations. It will provide the reader with an explanation of the physical principles underlying the method and a Python…
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility over a class of possible models. We…
We analyze the potential of reinsurance for reversing the current trend of decreasing capital guarantees in life insurance products. Providing an insurer with an opportunity to shift part of the financial risk to a reinsurer, we solve the…
Several problems arising in Economics and Finance are analyzed using concepts and quantitative methods from Physics. Here is the abridged abstact: Chapter 1: By analogy with energy, the equilibrium probability distribution of money must…
In the econometrics of financial time series, it is customary to take some parametric model for the data, and then estimate the parameters from historical data. This approach suffers from several problems. Firstly, how is estimation error…
We reconsider the microeconomic foundations of financial economics. Motivated by the importance of Knightian Uncertainty in markets, we present a model that does not carry any probabilistic structure ex ante, yet is based on a common order.…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
The optimal taxation of assets requires attention to two concerns: 1) the elasticity of the supply of assets and 2) the impact of taxing assets on distributional objectives. The most efficient way to attend to these two concerns is to tax…