Related papers: Interest Rate Dynamics and Commodity Prices
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
The analysis of markets with indivisible goods and fixed exogenous prices has played an important role in economic models, especially in relation to wage rigidity and unemployment. This research report provides a mathematical and…
We analyse four consecutive cycles observed in the USA for employment and inflation. They are driven by three oil price shocks and an intended interest rate shock. Non-linear coupling between the rate equations for consumer products as prey…
Uncertainty, characterised by randomness and stochasticity, is ubiquitous in applications of evolutionary game theory across various fields, including biology, economics and social sciences. The uncertainty may arise from various sources…
Implementing a set of microeconomic criteria, we develop price dynamics equations using a function of demand/supply with key symmetry properties. The function of demand/supply can be linear or nonlinear. The type of function determines the…
The interest rates (or nominal yields) can be negative, this is an unavoidable fact which has already been visible during the Great Depression (1929-39). Nowadays we can find negative rates easily by e.g. auditing. Several theoretical and…
This paper surveys the empirical literature of inflation targeting. The main findings from our review are the following: there is robust empirical evidence that larger and more developed countries are more likely to adopt the IT regime; the…
This paper develops a strategic model of trade between two regions in which, depending on the relation among output, financial resources and transportation costs, the adjustment of prices towards an equilibrium is studied. We derive…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. The possibility of extreme price movements increases the risk of trading in electricity markets. However, underlying the…
Communication is now a standard tool in the central bank's monetary policy toolkit. Theoretically, communication provides the central bank an opportunity to guide public expectations, and it has been shown empirically that central bank…
In two previous papers the author developed a second-order price adjustment (t\^atonnement) process. This paper extends the approach to include both quantity and price adjustments. We demonstrate three results: a analogue to physical…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
We introduce a first theory of price impact in presence of an interest-rates term structure. We explain how one can formulate instantaneous and transient price impact on bonds with different maturities, including a cross price impact that…
In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…
We analyze daily prices of 29 commodities and 2449 stocks, each over a period of $\approx 15$ years. We find that the price fluctuations for commodities have a significantly broader multifractal spectrum than for stocks. We also propose…
We present analytic and numerical results for two models, namely the minority model and the bar-attendance model, which offer simple paradigms for a competitive marketplace. Both models feature heterogeneous agents with bounded rationality…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
We discuss several aspects of creation of adequate mathematical models in other sciences. In particular, many difficulties stem from great complexity of the source systems and the presence of a variety of uncertain factors. We illustrate…
We present a new model for commodity pricing that enhances accuracy by integrating four distinct risk factors: spot price, stochastic volatility, convenience yield, and stochastic interest rates. While the influence of these four variables…