Related papers: Bubble Necessity Theorem
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…
Material mixing induced by a Rayleigh-Taylor instability occurs ubiquitously in either nature or engineering when a light fluid pushes against a heavy fluid, accompanying with the formation and evolution of chaotic bubbles. Its general…
Traditionally categorical data analysis (e.g. generalized linear models) works with simple, flat datasets akin to a single table in a database with no notion of missing data or conflicting versions. In contrast, modern data analysis must…
A dynamic model of collective consumption and saving decisions made by a finite number of agents with constant but different discount rates is developed. Collective utility is a weighted sum of individual utilities with time-varying utility…
Business cycles (a periodic change of e.g. GDP over five to ten years) exist, but a proper explanation for it is still lacking. Here we extend the well-known NAIRU (non-accelerating inflation rate of unemployment) model, resulting in a set…
Supply networks are essential for modern production, yet their critical properties remain understudied. We present a stochastic model with random production capacities to analyze material flow to a root node, focusing on topology and buffer…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
Beyond its obvious macro-economic relevance, fiat money has important micro-economic implications. They matter for addressing No. 8 in Smale's "Mathematical Problems for the Next Century": extend the mathematical model of general…
Proving the existence of speculative financial bubbles even a posteriori has proven exceedingly difficult so anticipating a speculative bubble ex ante would at first seem an impossible task. Still as illustrated by the recent turmoil in…
We introduce the concept of "negative bubbles" as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the…
We discuss a possible scenario to induce a bubble universe using buildable bubbles. First, we observe that if there is no violation of the null energy condition, all bubbles are buildable and do not have inflation if their initial…
We study equilibria of markets with $m$ heterogeneous indivisible goods and $n$ consumers with combinatorial preferences. It is well known that a competitive equilibrium is not guaranteed to exist when valuations are not gross substitutes.…
We discuss various models of inflationary universe with $\Omega \not = 1$. A homogeneous universe with $\Omega > 1$ may appear due to creation of the universe "from nothing" in the theories where the effective potential becomes very steep…
The idea that the universe might be open is an old one, and the possibility of having an open universe arise form inflation is not new either. However, a concrete realization of a consistent single-bubble open inflation model is known only…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
We apply Geometric Arbitrage Theory to obtain results in mathematical finance for credit markets, which do not need stochastic differential geometry in their formulation. We obtain closed form equations involving default intensities and…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
The disbalance of Supply and Demand is typically considered as the driving force of the markets. However, the measurement or estimation of Supply and Demand at price different from the execution price is not possible even after the…
This paper deals with asset price bubbles modeled by strict local martingales. With any strict local martingale, one can associate a new measure, which is studied in detail in the first part of the paper. In the second part, we determine…