Related papers: Bubble Necessity Theorem
In this paper we employ deep learning techniques to detect financial asset bubbles by using observed call option prices. The proposed algorithm is widely applicable and model-independent. We test the accuracy of our methodology in numerical…
Recent developments in cosmology suggest that much of the universe is in a state of explosive, accelerated expansion, called inflation. We live in a "bubble" where inflation has ended, and other bubbles with diverse properties are…
We present a general equilibrium macro-finance model with a positive feedback loop between capital investment and land price. As leverage is relaxed beyond a critical value, through the financial accelerator, a phase transition occurs from…
We develop a theory of demand economics for an era of material abundance. The binding constraint on growth has shifted from insufficient aggregate demand to inadequate demand-tier upgrading. Our result is that, the new engine of growth lies…
I give a general formulation of the constraints on models of inflation ended by a first order phase transition arising from the requirement that they do not produce too many large (observable) true vacuum voids -- the `big bubble problem'.…
This paper develops a theory of competitive equilibrium with indivisible goods based entirely on economic conditions on demand. The key idea is to analyze complementarity and substitutability between bundles of goods, rather than merely…
As we show using the notion of equilibrium in the theory of infinite sequential games, bubbles and escalations are rational for economic and environmental agents, who believe in an infinite world. This goes against a vision of a self…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…
This paper provides a rigorous and gap-free proof of the index theorem used in the theory of regular economy. In the index theorem that is the subject of this paper, the assumptions for the excess demand function are only several usual…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
A general theory of innovation and progress in human society is outlined, based on the combat between two opposite forces (conservatism/inertia and speculative herding "bubble" behavior). We contend that human affairs are characterized by…
We introduce a simple generalization of rational bubble models which removes the fundamental problem discovered by [Lux and Sornette, 1999] that the distribution of returns is a power law with exponent less than 1, in contradiction with…
It is already understood that the increasing observational evidence for an open Universe can be reconciled with inflation if our horizon is contained inside one single huge bubble nucleated during the inflationary phase transition. In this…
We extend the model of rational bubbles of Blanchard and of Blanchard and Watson to arbitrary dimensions d: a number d of market time series are made linearly interdependent via d times d stochastic coupling coefficients. We first show that…
We obtain an exact necessary and sufficient condition for the existence and uniqueness of equilibrium asset prices in infinite horizon, discrete-time, arbitrage free environments. Through several applications we show how the condition…
In physics the value of a theory is measured by its agreement with experimental data. But how should the physics community gauge the value of an emerging theory that has not been tested experimentally as of yet? With no reality check, a…
Identifying unambiguously the presence of a bubble in an asset price remains an unsolved problem in standard econometric and financial economic approaches. A large part of the problem is that the fundamental value of an asset is, in…
The condition for adiabatic approximation are of basic importance for the applications of the adiabatic theorem. The traditional quantitative condition was found to be necessary but not sufficient, but we do not know its physical meaning…
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…
We argue that the present crisis and stalling economy continuing since 2007 are rooted in the delusionary belief in policies based on a "perpetual money machine" type of thinking. We document strong evidence that, since the early 1980s,…