Related papers: Macroeconomic Dynamics of Assets, Leverage and Tru…
Multifractal processes are a relatively new tool of stock market analysis. Their power lies in the ability to take multiple orders of autocorrelations into account explicitly. In the first part of the paper we discuss the framework of the…
We revisit the classical Merton consumption--investment problem when risky-asset returns are modeled by stochastic differential equations interpreted through a general $\alpha$-integral, interpolating between It\^{o}, Stratonovich, and…
This paper presents a model that studies the impact of credit expansions arising from increases in collateral values or lower interest rate policies on long-run productivity and economic growth in a two-sector endogenous growth economy,…
Predicting future operational risk losses gives rise to a significant challenge due to the heterogeneous and time-dependent structures present in real-world data. Furthermore, stress test exercises require examining the relationship with…
We consider the problem of governing systemic risk in an assets-liabilities dynamical model of banking system. In the model considered each bank is represented by its assets and its liabilities.The capital reserves of a bank are the…
All economies require physical resource consumption to grow and maintain their structure. The modern economy is additionally characterized by private debt. The Human and Resources with MONEY (HARMONEY) economic growth model links these…
This paper analyzes the robust long-term growth rate of expected utility and expected return from holding a leveraged exchange-traded fund (LETF). When the Markovian model parameters in the reference asset are uncertain, the robust…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
We demonstrate using multi-layered networks, the existence of an empirical linkage between the dynamics of the financial network constructed from the market indices and the macroeconomic networks constructed from macroeconomic variables…
Peters (2011a) defined an optimal leverage which maximizes the time-average growth rate of an investment held at constant leverage. It was hypothesized that this optimal leverage is attracted to 1, such that, e.g., leveraging an investment…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
Fundamental variables in financial market are not only price and return but a very important role is also played by trading volumes. Here we propose a new multivariate model that takes into account price returns, logarithmic variation of…
This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
Background: For complex financial systems, the negative and positive return-volatility correlations, i.e., the so-called leverage and anti-leverage effects, are particularly important for the understanding of the price dynamics. However,…
We present macroeconomic model that describes evolution of macroeconomic variables and macroeconomic waves on economic space. Risk ratings of economic agents play role of their coordinates on economic space. Aggregation of economic…
We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…
Solomon and Golo [1] have recently proposed an autocatalytic (self-reinforcing) feedback model which couples a macroscopic system parameter (the interest rate), a microscopic parameter that measures the distribution of the states of the…
We consider a model of a simple financial system consisting of a leveraged investor that invests in a risky asset and manages risk by using Value-at-Risk (VaR). The VaR is estimated by using past data via an adaptive expectation scheme. We…
We show that typical behaviors of market participants at the high frequency scale generate leverage effect and rough volatility. To do so, we build a simple microscopic model for the price of an asset based on Hawkes processes. We encode in…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…