Related papers: Bubble Necessity Theorem
The present work is devoted to a model of bubble collapse in a Newtonian viscous liquid caused by an initial bubble wall motion. The obtained bubble dynamics described by an analytic solution significantly depends on the liquid and bubble…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
The basic workings of inflationary models are summarized, along with the arguments that strongly suggest that our universe is the product of inflation. I describe the quantum origin of density perturbations, giving a heuristic derivation of…
The substantial turmoil created by both 2000 dot-com crash and 2008 subprime crisis has fueled the belief that the two classical paradigms of economics, which are the invisible hand and the rational agent, are not appropriate to describe…
Most models of inflation have small parameters, either to guarantee sufficient inflation or the correct magnitude of the density perturbations. In this paper we show that, in supersymmetric theories with weak scale supersymmetry breaking,…
This article continues our analysis of the gold price dynamics that was published in December 2010 (abs/1012.4118) and forecasted the possibility of the "burst of the gold bubble" in April - June 2011. Our recent analysis suggests the…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
Proponents of behavioral finance have identified several "puzzles" in the market that are inconsistent with rational finance theory. One such puzzle is the "excess volatility puzzle". Changes in equity prices are too large given changes in…
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this…
We show that the quotient of Levy processes of jump-diffusion type has a fat-tailed distribution. An application is to price theory in economics. We show that fat tails arise endogenously from modeling of price change based on an excess…
Peters (2011a) defined an optimal leverage which maximizes the time-average growth rate of an investment held at constant leverage. It was hypothesized that this optimal leverage is attracted to 1, such that, e.g., leveraging an investment…
Higher-form flux that extends in all 3+1 dimensions of spacetime is a source of positive vacuum energy that can drive meta-stable eternal inflation. If the flux also threads compact extra dimensions, the spontaneous nucleation of a bubble…
I show that if the capital accumulation dynamics is stochastic a new term, in addition to that given by accounting prices, has to be introduced in order to derive a correct estimate of the genuine wealth of an economy. In a simple model…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
Bubbles in the interstellar medium are produced by astrophysical sources, which continuously or explosively deposit large amount of energy into the ambient medium. These expanding bubbles can drive shocks in front of them, which dynamics is…
Sornette et al. claimed that the optimal supply does not agree with the average demand, by analyzing a bakery model where a daily demand fluctuates with a uniform distribution. In this note, we extend the model to general probability…
A bubble is characterized by the presence of an underlying asset whose discounted price process is a strict local martingale under the pricing measure. In such markets, many standard results from option pricing theory do not hold, and in…
This paper establishes the existence of equilibrium in an economy with production and a continuum of consumers, each of whose incomplete and price-dependent preferences are defined on commodities they may consider deleterious, bads which…
Inflationary models are generally credited with explaining the large scale homogeneity, isotropy, and flatness of our universe as well as accounting for the origin of structure (i.e., the deviations from exact homogeneity) in our universe.…
Most models of inflation have small parameters, either to guarantee sufficient inflation or the correct magnitude of the density perturbations. In this paper we show that, in supersymmetric theories with weak scale supersymmetry breaking,…