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General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature non-convexities in…
Scaling properties in financial fluctuations are reviewed from the standpoint of statistical physics. We firstly show theoretically that the balance of demand and supply enhances fluctuations due to the underlying phase transition…
An innovative method is proposed to construct a quantile dependence system for inflation and money growth. By considering all quantiles and leveraging a novel notion of quantile sensitivity, the method allows the assessment of changes in…
We discuss a simple model based on the Minority Game which reproduces the main stylized facts of anomalous fluctuations in finance. We present the analytic solution of the model in the thermodynamic limit and show that stylized facts arise…
Low scale inflation has many virtues and it has been claimed that its natural realisation in supersymmetric standard model can be achieved rather easily. In this letter we have demonstrated that also in this case the dynamics of the hidden…
We propose a new mechanism to generate density perturbations in inflationary models. Spatial fluctuations in the decay rate of the inflaton field to ordinary matter lead to fluctuations in the reheating temperature. We argue that in most…
By incorporating market impact and asymmetric sensitivity into the evolutionary minority game, we study the coevolutionary dynamics of stock prices and investment strategies in financial markets. Both the stock price movement and the…
Standard approaches to the theory of financial markets are based on equilibrium and efficiency. Here we develop an alternative based on concepts and methods developed by biologists, in which the wealth invested in a financial strategy is…
The large hierarchy between the Planck scale and the weak scale can be explained by the dynamical breaking of supersymmetry in strongly coupled gauge theories. Similarly, the hierarchy between the Planck scale and the energy scale of…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
Systematically biased forecasts are typically interpreted as evidence of forecasters' irrationality and/or asymmetric loss. In this paper we propose an alternative explanation: when forecasts inform policy decisions, and the resulting…
The standard wage Phillips curve aggregates away from which workers reset wages when. I show this aggregation omits a first-order term: the covariance between workers' cost-push exposure and their reset frequency. I introduce two sufficient…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves…
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…
This paper outlines a critical gap in the assessment methodology used to estimate the macroeconomic costs and benefits of climate policy. It shows that the vast majority of models used for assessing climate policy use assumptions about the…
How does public debt matter for price stability? If it is useful for the private sector to insure idiosyncratic risk, even transitory government debt expansions can exert upward pressure on interest rates and create inflation. As I…