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Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
An axiomatic approach to macroeconomics based on the mathematical structure of thermodynamics is presented. It deduces relations between aggregate properties of an economy, concerning quantities and flows of goods and money, prices and the…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
We study a monetary version of the Keen model by merging two alternative extensions, namely the addition of a dynamic price level and the introduction of speculation. We recall and study old and new equilibria, together with their local…
We argue that a negative interest rate policy (NIRP) can be an effect tool for macroeconomic stabilization. We first discuss how implementing negative rates on reserves held at a central bank does not pose any theoretical difficulty, with a…
The key characteristic of a true free market economy is that exchanges are entirely voluntary. When there is a monopoly in the creation of currency as we have in today's markets, you no longer have a true free market. Features of the…
We consider the relationship between economic activity and intervention, including monetary and fiscal policy, using a universal dynamic framework. Central bank policies are designed for growth without excess inflation. However,…
In the late 90's, after severe financial and economic crisis, accompanied by inflation and exchange rate instability, Eastern Europe emerged into two groups of countries with radically contrasting monetary regimes (Currency Boards and…
Conventional economic analysis of stringent climate change mitigation policy generally concludes various levels of economic slowdown as a result of substantial spending on low carbon technology. Equilibrium economics however could not…
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
Structural models with no solution are incoherent, and those with multiple solutions are incomplete. We show that models with occasionally binding constraints are not generically coherent. Coherency requires restrictions on the parameters…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
The optimal (`equilibrium') macroscopic properties of an economy with $N$ industries endowed with different technologies, $P$ commodities and one consumer are derived in the limit $N\to\infty$ with $n=N/P$ fixed using the replica method.…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…
Condensation of fluctuations is an interesting phenomenon conceptually distinct from condensation on average. One stricking feature is that, contrary to what happens on average, condensation of fluctuations may occurr even in the absence of…
We consider a mean-field model of firms competing \`a la Cournot on a commodity market, where the commodity price is given in terms of a power inverse demand function of the industry-aggregate production. Investment is irreversible and…