Related papers: Structural Estimation of Behavioral Heterogeneity

The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…

We present an agent behavior based microscopic model that induces jumps, spikes and high volatility phases in the price process of a traded asset. We transfer dynamics of thermally activated jumps of an unexcited/ excited two state system…

We study the behavior of simple models for financial markets with widely spread frequency either in the trading activity of agents or in the occurrence of basic events. The generic picture of a phase transition between information efficient…

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…

We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…

Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…

Accurate stock price forecasting has consistently remained a pivotal yet challenging FinTech task that underpins quantitative trading and investment decision making. Recent efforts have been dedicated to modeling various complex…

We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…

When pricing options, there may be different views on the instantaneous mean return of the underlying price process. According to Black (1972), where there exist heterogeneous views on the instantaneous mean return, this will result in…

We present a new type of spin market model, populated by hierarchical agents, represented as configurations of sites and arcs in an evolving network. We describe two analytic techniques for investigating the asymptotic behavior of this…

We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…

We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…

In this paper we discuss a scaling approach to business fluctuations. Our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to (re)discover a set of stylized facts which have to be…

Interactions between people are the basis on which the structure of our society arises as a complex system and, at the same time, are the starting point of any physical description of it. In the last few years, much theoretical research has…

We build a multiassets heterogeneous agents model with fundamentalists and chartists, who make investment decisions by maximizing the constant relative risk aversion utility function. We verify that the model can reproduce the main stylized…

Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…

Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…

This paper develops a dynamic equilibrium model where agents exhibit a strong form of belief heterogeneity: they disagree about zero probability events. It is shown that, somewhat surprisingly, equilibrium exists in this setting, and that…

One of the most important empirical findings in microeconometrics is the pervasiveness of heterogeneity in economic behaviour (cf. Heckman 2001). This paper shows that cumulative distribution functions and quantiles of the nonparametric…

The stability analysis of socioeconomic systems has been centered on answering whether small perturbations when a system is in a given quantitative state will push the system permanently to a different quantitative state. However, typically…