Related papers: Elasticity theory of structuring
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
We formulate a theory of shape valid for objects of arbitrary dimension whose contours are path connected. We apply this theory to the design and modeling of viable trajectories of complex dynamical systems. Infinite families of…
We demonstrate that the free motion of any two-dimensional rigid body colliding elastically with two parallel, flat walls is equivalent to a billiard system. Using this equivalence, we analyze the integrable and chaotic properties of this…
We consider games of chance played by someone with external capital that cannot be applied to the game and determine how this affects risk-adjusted optimal betting. Specifically, we focus on Kelly optimization as a metric, optimizing the…
This is a review about financial dependencies which merges efforts in econophysics and financial economics during the last few years. We focus on the most relevant contributions to the analysis of asset markets' dependencies, especially…
For gambling on horses, a one-parameter family of utility functions is proposed, which contains Kelly's logarithmic criterion and the expected-return criterion as special cases. The strategies that maximize the utility function are derived,…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
In order to emphasize cross-correlations for fluctuations in major market places, series of up and down spins are built from financial data. Patterns frequencies are measured, and statistical tests performed. Strong cross-correlations are…
As we enter the age of designer matter - where objects can morph and change shape on command - what tools do we need to create shape-shifting structures? At the heart of an elastic deformation is the combination of dilation and distortion,…
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…
We develop a simple framework to analyze how targeted persuasive advertising shapes market power and welfare. A designer flexibly manipulates the demand curve by influencing individual valuations at a cost. A monopolist prices against this…
This paper deals with shape optimization for elastic materials under stochastic loads. It transfers the paradigm of stochastic dominance, which allows for flexible risk aversion via comparison with benchmark random variables, from…
The volatility of financial instruments is rarely constant, and usually varies over time. This creates a phenomenon called volatility clustering, where large price movements on one day are followed by similarly large movements on successive…
This paper proposes strategies for designing a system whose computational model is subject to aleatory and epistemic uncertainty. Aleatory variables, which are caused by randomness in physical parameters, are draws from a possibly unknown…
This paper expands the notion of robust profit opportunities in financial markets to incorporate distributional uncertainty using Wasserstein distance as the ambiguity measure. Financial markets with risky and risk-free assets are…
We introduce a new methodology that enables detection of the onset of convergence towards Nash equilibria in simple repeated games with infinitely large strategy spaces, thereby revealing the heuristics used in decision-making. The method…
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…
A key challenge in complex design problems that permeate science and engineering is the need to balance design objectives for specific design elements or subsystems with global system objectives. Global objectives give rise to competing…