Related papers: Robust Financial Bubbles
The use of available disturbance predictions within a nominal model predictive control formulation is studied. The main challenge that arises is the loss of recursive feasibility and stability guarantees when a persistent disturbance is…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
Distributionally robust control is a well-studied framework for optimal decision making under uncertainty, with the objective of minimizing an expected cost function over control actions, assuming the most adverse probability distribution…
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and…
The new notion of maturity-independent risk measures is introduced and contrasted with the existing risk measurement concepts. It is shown, by means of two examples, one set on a finite probability space and the other in a diffusion…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
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…
Extreme value theory provides an asymptotically justified framework for estimation of exceedance probabilities in regions where few or no observations are available. For multivariate tail estimation, the strength of extremal dependence is…
We study and generalize in various ways the model of rational expectation (RE) bubbles introduced by Blanchard and Watson in the economic literature. First, bubbles are argued to be the equivalent of Goldstone modes of the fundamental…
A very brief history of relative valuation in neoclassical finance since 1973 is presented, with attention to core currency issues for emerging economies. Price formation is considered in the context of hierarchical causality, with…
We investigate a randomization procedure undertaken in real option games which can serve as a basic model of regulation in a duopoly model of preemptive investment. We recall the rigorous framework of [M. Grasselli, V. Lecl\`ere and M.…
Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
This is the first in a series of papers where we study the dynamics of a bubble wall beyond usual approximations, such as the assumptions of spherical bubbles and infinitely thin walls. In this paper, we consider a vacuum phase transition.…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
Conditional probabilities are a core concept in machine learning. For example, optimal prediction of a label $Y$ given an input $X$ corresponds to maximizing the conditional probability of $Y$ given $X$. A common approach to inference tasks…
In safety-critical deep learning applications, robustness measures the ability of neural models that handle imperceptible perturbations in input data, which may lead to potential safety hazards. Existing pre-deployment robustness assessment…
A dynamical system is strongly robustly safe provided that it remains safe in the presence of a continuous and positive perturbation, named robustness margin, added to both the argument and the image of the right-hand side (the dynamics).…
Development of several alternative mathematical models for the biological system in question and discrimination between such models using experimental data is the best way to robust conclusions. Models which challenge existing theories are…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…