Related papers: Multi-Asset Bubbles Equilibrium Price Dynamics
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
This paper presents a unified multi-asset, multi-group asset-flow model that integrates three foundational frameworks from the behavioral finance literature. The model captures the dynamics of financial markets where multiple assets are…
We show that a simple model of a spatially resolved evolving economic system, which has a steady state under simultaneous updating, shows stable oscillations in price when updated asynchronously. The oscillations arise from a gradual…
Oft-cited causes of mini-flash crashes include human errors, endogenous feedback loops, the nature of modern liquidity provision, fundamental value shocks, and market fragmentation. We develop a mathematical model which captures aspects of…
Imitative and contrarian behaviors are the two typical opposite attitudes of investors in stock markets. We introduce a simple model to investigate their interplay in a stock market where agents can take only two states, bullish or bearish.…
This paper presents an asset pricing model in an incomplete market involving a large number of heterogeneous agents based on the mean field game theory. In the model, we incorporate habit formation in consumption preferences, which has been…
The agent-based Yard-Sale model of wealth inequality is generalized to incorporate exponential economic growth and its distribution. The distribution of economic growth is nonuniform and is determined by the wealth of each agent and a…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We introduce the concept of "negative bubbles" as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
We develop a theory of bid and ask price dynamics where the two prices form due to interaction of buy and sell orders. In this model the two prices are represented by eigenvalues of a 2x2 price operator corresponding to "bid" and "ask"…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
In this paper we investigate quantitatively statistical properties of ensemble of {\it land prices} in Japan in the period from 1981 to 2002, corresponding to the period of bubbles and crashes. We find that the tail of the distributions of…
We formulate an equilibrium model of intraday trading in electricity markets. Agents face balancing constraints between their customers consumption plus intraday sales and their production plus intraday purchases. They have continuously…
We study a generalization of the model of a dark market due to Duffie-G\^arleanu- Pedersen [6]. Our market is segmented and involves multiple assets. We show that this market has a unique asymptotically stable equilibrium. In order to…
We propose two rational expectation models of transient financial bubbles with heterogeneous arbitrageurs and positive feedbacks leading to self-reinforcing transient stochastic faster-than-exponential price dynamics. As a result of the…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…