Related papers: Big is Fragile: An Attempt at Theorizing Scale
Many studies in economics deal with the non-reliability cost to assess insurance fees or investment analyses, but none takes into consideration the mechanical aspect of reliability analysis. Other studies in mechanics give some tools and…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
The productivity of a common pool of resources may degrade when overly exploited by a number of selfish investors, a situation known as the tragedy of the commons (TOC). Without regulations, agents optimize the size of their individual…
Although classical economic theory is based on the concept of stable equilibrium, real economic systems appear to be always out of equilibrium. Indeed, they share many of the dynamical features of other complex systems, e.g., ecological…
A challenging problem in the social sciences is the characterization of the formation of ``social capital''. It is believed that societies with more social capital are more democratic and economically developed than societies with little…
Stablecoins have historically depegged due from par to large sales, possibly of speculative nature, or poor reserve asset quality. Using a global game which addresses both concerns, we show that the selling pressure on stablecoin holders…
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other…
In a network, a local disturbance can propagate and eventually cause a substantial part of the system to fail, in cascade events that are easy to conceptualize but extraordinarily difficult to predict. Here, we develop a statistical…
Cascading failures, wherein the failure of one component triggers subsequent failures in complex interconnected systems, pose a significant risk of disruptions and emerge across various domains. Understanding and mitigating the risk of such…
Collectives form non-equilibrium social structures characterised by a volatile dynamics. Individuals join or leave. Social relations change quickly. Therefore, differently from engineered or ecological systems, a resilient reference state…
We study the disequilibrium dynamics of a stylised model of production networks in which firms use perishable and non-substitutable intermediate inputs, so that adverse idiosyncratic productivity shocks can trigger downstream shortages and…
Systemic risk refers to the risk that the financial system is susceptible to failures due to the characteristics of the system itself. The tremendous cost of systemic risk requires the design and implementation of tools for the efficient…
Risk and utility functionals are fundamental building blocks in economics and finance. In this paper we investigate under which conditions a risk or utility functional is sensitive to the accumulation of losses in the sense that any…
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical…
It is no secret that many projects fail, regardless of the business sector, software projects are notoriously disaster victims, not necessarily because of technological failure, but more often due to their uncertainties. The threats…
``Self-Organised Criticality'' (SOC) is the mechanism by which complex systems spontaneously settle close to a *critical point*, at the edge between stability and chaos, and characterized by fat-tailed fluctuations and long-memory…
Sparsity or complexity? In modern high-dimensional asset pricing, these are often viewed as competing principles: richer feature spaces appear to favor complexity, while economic intuition has long favored parsimony. We show that this…
We study a common-pool resource game where the resource experiences failure with a probability that grows with the aggregate investment in the resource. To capture decision making under such uncertainty, we model each player's risk…
We live in a modern world supported by large, complex networks. Examples range from financial markets to communication and transportation systems. In many realistic situations the flow of physical quantities in the network, as characterized…
It is shown that the axioms for coherent risk measures imply that whenever there is an asset in a portfolio that dominates the others in a given sample (which happens with finite probability even for large samples), then this portfolio…