Related papers: Toward Economics as a New Complex System
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
This paper shows that jumps in financial asset prices are often erroneously identified and are, in fact, rare events accounting for a very small proportion of the total price variation. We apply new econometric techniques to a comprehensive…
Changes (returns) in stock index prices and exchange rates for currencies are argued, based on empirical data, to obey a stable distribution with characteristic exponent $ \alpha < 2 $ for short sampling intervals and a Gaussian…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
Mounting evidences are being gathered suggesting that income and wealth distribution in various countries or societies follow a robust pattern, close to the Gibbs distribution of energy in an ideal gas in equilibrium, but also deviating…
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
While historically, economists have been primarily occupied with analyzing the behaviour of the markets, electronic trading gave rise to a new class of unprecedented problems associated with market fairness, transparency and manipulation.…
At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price,...). Thus, in practice, market participants face the problem…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
We test whether the futures prices of some commodity and energy markets are determined by stochastic rules or exhibit nonlinear deterministic endogenous fluctuations. As for the methodologies, we use the maximal Lyapunov exponents (MLE) and…
Central results in economics guarantee the existence of efficient equilibria for various classes of markets. An underlying assumption in early work is that agents are price-takers, i.e., agents honestly report their true demand in response…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
This article is a response to the recent Worrying Trends in Econophysics critique written by four respected theoretical economists. Two of the four have written books and papers that provide very useful critical analyses of the shortcomings…
We investigate a number of Artificial Neural Network architectures (well-known and more ``exotic'') in application to the long-term financial time-series forecasts of indexes on different global markets. The particular area of interest of…
Why is ``worthless'' fiat money generally accepted as payment for goods and services? In equilibrium theory, the value of money is generally not determined: the number of equations is one less than the number of unknowns, so only relative…
This article is a supplement to my main contribution to the Routledge Handbook of Complexity Economics (2023). On the basis of three recent papers, it presents an unconventional perspective on economic inequality from a statistical physics…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…