Related papers: Non-Equivalent Beliefs and Subjective Equilibrium …
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
Models of the convergence of opinion in social systems have been the subject of a considerable amount of recent attention in the physics literature. These models divide into two classes, those in which individuals form their beliefs based…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
Rational pure bubble models feature multiple (and often a continuum of) equilibria, which makes model predictions and policy analyses non-robust. We show that when the interest rate in the fundamental equilibrium is below the economic…
Motivated by empirical research on bias and opinion formation, we formulate a multidimensional nonlinear opinion-dynamical model where agents have individual biases, which are fixed, as well as opinions, which evolve. The dimensions…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
We consider a stochastic dynamic game where players have their own linear state dynamics and quadratic cost functions. Players are coupled through some environment variables, generated by another linear system driven by the states and…
Standard rational expectations models with an occasionally binding zero lower bound constraint either admit no solutions (incoherence) or multiple solutions (incompleteness). This paper shows that deviations from full-information rational…
We study the existence of equilibrium when agents' preferences may not beconvex. For some specific utility functions, we provide a necessary and sufficientcondition under which there exists an equilibrium. The standard approach cannot be…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…
Establishing unambiguously the existence of speculative bubbles is an on-going controversy complicated by the need of defining a model of fundamental prices. Here, we present a novel empirical method which bypasses all the difficulties of…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
We study how AI agents form expectations and trade in experimental asset markets. Using a simulated open-call auction populated by autonomous Large Language Model (LLM) agents, we document three main findings. First, AI agents exhibit…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
Models of continuous opinion dynamics under bounded confidence show a sharp transition between a consensus and a polarization phase at a critical global bound of confidence. In this paper, heterogeneous bounds of confidence are studied. The…
We present an opinion dynamics model framework discarding two common assumptions in the literature: (a) that there is direct influence between beliefs of neighbouring agents, and (b) that agent belief is static in the absence of social…
We propose an opinion model based on agents located at the vertices of a regular lattice. Each agent has an independent opinion (among an arbitrary, but fixed, number of choices) and its own degree of conviction. The latter changes every…