Related papers: Negative interest rates: why and how?
When mutation rates are low, natural selection remains effective, and increasing the mutation rate can give rise to an increase in adaptation rate. When mutation rates are high to begin with, however, increasing the mutation rate may have a…
This article is an extension of the work of one of us (Coopersmith, 2011) in deriving the relationship between certain interest rates and the inflation rate of a two component economic system. We use the well-known Fisher relation between…
Operational risk is the risk relative to monetary losses caused by failures of bank internal processes due to heterogeneous causes. A dynamical model including both spontaneous generation of losses and generation via interactions between…
The challenge of understanding the collective behaviors of social systems can benefit from methods and concepts from physics [1-6], not because humans are similar to electrons, but because certain large-scale behaviors can be understood…
We study the causes and consequences of bank runs using a novel dataset of bank runs in the United States from 1863 to 1934. Applying large language models to historical newspapers, we identify 3,421 runs on individual banks. The resulting…
Debt aversion can have severe adverse effects on financial decision-making. We propose a model of debt aversion, and design an experiment involving real debt and saving contracts, to elicit and jointly estimate debt aversion with…
Negative probabilities arise primarily in physics, statistical quantum mechanics and quantum computing. Negative probabilities arise as mixing distributions of unobserved latent variables in Bayesian modeling. Our goal is to provide a link…
This study contributes to the discussion about how higher public debt may not be costly because of the negative interest rate-growth differentials by simulating OLG models introduced by Blanchard (2019) under uncertainty, showing debt and…
The physical origins of negative refractive index are derived from a dilute microscopic model, producing a result that is generalized to the dense condensed phase limit. In particular, scattering from a thin sheet of electric and magnetic…
Why do banks fail? We create a panel covering most commercial banks from 1863 through 2024 to study the history of failing banks in the United States. Failing banks are characterized by rising asset losses, deteriorating solvency, and an…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
The idea that a material can exhibit negative compressibility is highly consequential for research and applications. As new forms for this effect are discovered, it is important to examine the range of possible mechanisms and ways to design…
We introduce a new regression method that relates the mean of an outcome variable to covariates, under the "adverse condition" that a distress variable falls in its tail. This allows to tailor classical mean regressions to adverse…
We find that factors explaining bank loan recovery rates vary depending on the state of the economic cycle. Our modeling approach incorporates a two-state Markov switching mechanism as a proxy for the latent credit cycle, helping to explain…
In the present paper, we investigate the optimal capital injection behaviour of an insurance company if the interest rate is allowed to become negative. The surplus process of the considered insurance entity is assumed to follow a Brownian…
High future discounting rates favor inaction on present expending while lower rates advise for a more immediate political action. A possible approach to this key issue in global economy is to take historical time series for nominal interest…
We discuss a simple extension of the Ho and Lee model with generic time-dependent drift in which: 1) we compute bond prices analytically; 2) the yield curve is sensible and the asymptotic yield is positive; and 3) our analytical solution…
This paper starts by defining the criteria where the early-exercise of an American option is never optimal, under positive, or negative rates. It follows with a short analysis of the various shapes of the exercise region under negative…
Inverse statistics in economics is considered. We argue that the natural candidate for such statistics is the investment horizons distribution. This distribution of waiting times needed to achieve a predefined level of return is obtained…
To the knowledge of the author, this is the first time it has been shown that interest rates that are extremely high by modern standards (100% and higher) are necessary within a zero-sum monetary system, and not just driven by greed.…