Related papers: Leverage, Endogenous Unbalanced Growth, and Asset …
We present a macroeconomic agent-based model that combines several mechanisms operating at the same timescale, while remaining mathematically tractable. It comprises enterprises and workers who compete in a job market and a commodity goods…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
The major perspective of this paper is to provide more evidence regarding how "quickly", in different macroeconomic states, companies adjust their capital structure to their leverage targets. This study extends the empirical research on the…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
We present a limits-to-arbitrage model to study the impact of securitization, leverage and credit risk protection on the cyclicity of bank credit. In a stable bank credit situation, no cycles of credit expansion or contraction appear.…
We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism.…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
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,…
This thesis develops equilibrium asset pricing models in incomplete markets with a large number of heterogeneous agents using mean field game theory. The market equilibrium is characterized by a novel form of mean field backward stochastic…
When trading incurs proportional costs, leverage can scale an asset's return only up to a maximum multiple, which is sensitive to its volatility and liquidity. In a model with one safe and one risky asset, with constant investment…
In nature and human societies, the effects of homogeneous and heterogeneous characteristics on the evolution of collective behaviors are quite different from each other. It is of great importance to understand the underlying mechanisms of…
We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is…
This paper investigates the emergence of wealth inequality through a minimalist kinetic exchange model that incorporates two fundamental economic features: fixed-amount transactions and hard budget constraints. In contrast to the maximum…
Why do companies choose particular capital structures? A compelling answer to this question remains elusive despite extensive research. In this article, we use double machine learning to examine the heterogeneous causal effect of credit…
We develop a mean-field theory of the growth, exchange and distribution (GED) model introduced by Kang et al. (preceding paper) that accurately describes the phase transition in the limit that the number of agents $N$ approaches infinity.…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
We consider the relationship between economic activity and intervention, including monetary and fiscal policy, using a universal dynamic framework. Central bank policies are designed for growth without excess inflation. However,…
In this paper, using the mean-field game theory, we study a problem of equilibrium price formation among many investors with exponential utility in the presence of liabilities unspanned by the security prices. The investors are…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…