Related papers: Leverage, Endogenous Unbalanced Growth, and Asset …
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
Wealth inequality remains a critical socioeconomic challenge, driven by systemic dynamics and self-reinforcing mechanisms that amplify the economic imbalances. Simplified models from statistical physics provide valuable insights into the…
The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to…
In the last decade, a large body of literature has been developed to explain the universal features of inequality in terms of income and wealth. By now, it is established that the distributions of income and wealth in various economies show…
House price increases have been steady over much of the last 40 years, but there have been occasional declines, most notably in the recent housing bust that started around 2007, on the heels of the preceding housing bubble. We introduce a…
The presented model provides an explanation to several empirically observed phenomena in spatial economics. By representing the system as a complex network of fixed-size land areas connected by trade between harbored activities, city size…
This study investigates the functioning of modern payment systems through the lens of banks' maturity mismatch practices, and it examines the effects of banks' refusal to roll over short-term interbank liabilities on financial stability.…
We provide a stochastic analysis of an overlapping-generations model under incomplete markets. By casting individual optimisation with idiosyncratic income risk into a forward-backward stochastic differential equation (FBSDE) system, we (i)…
We revisit a time-dependent, oval-shaped billiard to investigate a phase transition from bounded to unbounded energy growth. In the static case, the phase space exhibits a mixed structure. The chaotic sea in the static scenario leads to…
This paper proposes a change in perspective on the ``transformation of values'' problem: from ``searching for a single constant solution'' to ``characterizing the allocation space under objective constraints imposed by the physical…
A unified approach to quintessence and inflation is investigated with the use of a single scalar field. It is argued that successful potentials have to approximate a combination of exponential and inverse power-law decline in the limit of…
This work solves the equilibrium price formation problem for the risky stock by combining mean-field game theory with the binomial tree framework, adapting the classic approach of Cox, Ross \& Rubinstein. For agents with exponential and…
An extensive empirical literature documents a generally negative correlation, named the "leverage effect," between asset returns and changes of volatility. It is more challenging to establish such a return-volatility relationship for jumps…
In the model of Chain Inflation, a sequential chain of coupled scalar fields drives inflation. We consider a multidimensional potential with a large number of bowls, or local minima, separated by energy barriers: inflation takes place as…
Multifractal processes are a relatively new tool of stock market analysis. Their power lies in the ability to take multiple orders of autocorrelations into account explicitly. In the first part of the paper we discuss the framework of the…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We present a self-consistent model for explosive financial bubbles, which combines a mean-reverting volatility process and a stochastic conditional return which reflects nonlinear positive feedbacks and continuous updates of the investors'…
The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and…
In this article, we develop a model for the evolution of real estate prices. A wide range of inputs, including stochastic interest rates and changing demands for the asset, are considered. Maximizing their expected utility, home owners make…
Empirical distributions of wealth and income can be reproduced using simplified agent-based models of economic interactions, analogous to microscopic collisions of gas particles. Building upon these models of freely interacting agents, we…