Related papers: The Greek Public Debt Path: From Zero to Infinity
In the accompanied paper [14], a delayed nonlinear model for pricing corporate liabilities was developed. Using self-financed strategy and duplication we were able to derive two Random Partial Differential Equations (RPDEs) describing the…
We extend the exploration regarding dynamical approach of macroeconomic variables by tackling systematically expenditure using Statistical Physics models (for the first time to the best of our knowledge). Also, using polynomial distribution…
In this paper we present a simplified model of a proportional taxation system where citizens decide whether to pay taxes or evade them. We initially derive a dynamic equation for the fraction of evaders and then present both its critical…
In this article, we investigate the behavior of long-term options. In many cases, option prices follow an exponential decay (or growth) rate for further maturity dates. We determine under what conditions option prices are characterized by…
We study the relationship between foreign debt and GDP growth using a panel dataset of 50 countries from 1997 to 2015. We find that economic growth correlates positively with foreign debt and that the relationship is causal in nature by…
We analyze the valuation partial differential equation for European contingent claims in a general framework of stochastic volatility models where the diffusion coefficients may grow faster than linearly and degenerate on the boundaries of…
This paper proposes a simple technical approach for the analytical derivation of Point-in-Time PD (probability of default) forecasts, with minimal data requirements. The inputs required are the current and future Through-the-Cycle PDs of…
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous.…
This paper develops a recent line of economic theory seeking to understand public goods economies using methods of topological analysis. Our first main result is a very clean characterization of the economy's core (the standard solution…
Several studies have established the predictive power of the yield curve in terms of real economic activity. In this paper we use data for a variety of E.U. countries: both EMU (Germany, France, Italy) and non-EMU members (Sweden and the…
Managing exotic derivatives requires accurate mark-to-market pricing and stable Greeks for reliable hedging. The Local Volatility (LV) model distinguishes itself from other pricing models by its ability to match observable market prices…
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…
We propose a fast algorithm for computing the economic capital, Value at Risk and Greeks in the Gaussian factor model. The algorithm proposed here is much faster than brute force Monte Carlo simulations or Fourier transform based methods…
Computing the rate-distortion function for continuous sources is commonly regarded as a standard continuous optimization problem. When numerically addressing this problem, a typical approach involves discretizing the source space and…
The problem of demand inversion - a crucial step in the estimation of random utility discrete-choice models - is equivalent to the determination of stable outcomes in two-sided matching models. This equivalence applies to random utility…
We solve time-reversed stochastic inflation in the semi-infinite flat potential with a constant drift term and derive an exact expression for the probability distribution of the curvature fluctuations. It exhibits exponential decaying tails…
The correctness of Harrods model in the differential form is studied. The inadequacy of exponential growth of economy is shown; an alternative result is obtained. By example of Phillips model, an approach to correction of macroeconomic…
We propose a unified structural credit risk model incorporating both insolvency and illiquidity risks, in order to investigate how a firm's default probability depends on the liquidity risk associated with its financing structure. We assume…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
We consider a structural credit model for a large portfolio of credit risky assets where the correlation is due to a market factor. By considering the large portfolio limit of this system we show the existence of a density process for the…