Related papers: Leverage, Endogenous Unbalanced Growth, and Asset …
We propose a minimal model of the secured interbank network able to shed light on recent money markets puzzles. We find that excess liquidity emerges due to the interactions between the reserves and liquidity ratio constraints; the…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
We address the issue of the dynamics of wealth accumulation and economic crisis triggered by extreme inequality, attempting to stick to most possibly intrinsic assumptions. Our general framework is that of pure or modified multiplicative…
Firm growth process in the developing economies is known to produce divergence in their growth path giving rise to bimodality in the size distribution. Similar bimodality has been observed in wealth distribution as well. Here, we introduce…
We analyze the household savings problem in a general setting where returns on assets, non-financial income and impatience are all state dependent and fluctuate over time. All three processes can be serially correlated and mutually…
The practice of valuation by marking-to-market with current trading prices is seriously flawed. Under leverage the problem is particularly dramatic: due to the concave form of market impact, selling always initially causes the expected…
We revisit the classic paper of Tirole "Asset Bubbles and Overlapping Generations" (1985, Econometrica), which shows that the emergence of asset bubbles solves the capital over-accumulation problem. While Tirole's main insight holds with…
We consider a financial market model which consists of a financial asset and a large number of interacting agents classified into many types. Different types of agents are heterogeneous in their price expectations. Each agent can change its…
Current business cycle theory is an application of the general equilibrium theory. This paper presents the business cycle model without using general equilibrium framework. We treat agents risk assessments as their coordinates x on economic…
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…
In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…
We show that typical behaviors of market participants at the high frequency scale generate leverage effect and rough volatility. To do so, we build a simple microscopic model for the price of an asset based on Hawkes processes. We encode in…
In this work, we study an equilibrium-based continuous asset pricing problem which seeks to form a price process endogenously by requiring it to balance the flow of sales-and-purchase orders in the exchange market, where a large number of…
A wide variety of vacua, and their cosmological realization, may provide an explanation for the apparently anthropic choices of some parameters of particle physics and cosmology. If the probability on various parameters is weighted by…
Using a large quarterly macroeconomic dataset for the period 1960-2017, we document the ability of specific financial ratios from the housing market and firms' aggregate balance sheets to predict GDP over medium-term horizons in the United…
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 introduce a multivariate multidimensional mixed-effects regression model in a finite mixture framework. We relax the usual unidimensionality assumption on the random effects multivariate distribution. Thus, we introduce a…
In a previous study we developed a mean-field theory of dynamical transitions for the totally-asymmetric simple-exclusion process (TASEP) with open boundaries and Langmuir kinetics, in the so-called balanced regime, characterized by equal…
Voluntary insurance contracts constitute a puzzle because they increase the expectation value of one party's wealth, whereas both parties must sign for such contracts to exist. Classically, the puzzle is resolved by introducing non-linear…
We propose a simple model of inter-bank borrowing and lending where the evolution of the log-monetary reserves of $N$ banks is described by a system of diffusion processes coupled through their drifts in such a way that stability of the…