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The scale and terms of aggregate borrowing in an economy depend on the manner in which wealth is distributed across potential creditors with heterogeneous beliefs about the future. This distribution evolves over time as uncertainty is…
We show that in theories with a nontrivial kinetic term the contribution of the gravitational waves to the CMB fluctuations can be substantially larger than that is naively expected in simple inflationary models. This increase of the…
We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents…
Fund models are statistical descriptions of markets where all asset returns are spanned by the returns of a lower-dimensional collection of funds, modulo orthogonal noise. Equivalently, they may be characterised as models where the global…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
A new theory for pricing options of a stock is presented. It is based on the assumption that while successive variations in return are uncorrelated, the frequency with which a stock is traded depends on the value of the return. The solution…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
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…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
The objective of this work is the investigation of complexity, asymmetry, stochasticity and non-linearity of the financial and economic systems by using the tools of statistical mechanics and information theory. More precisely, this thesis…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
The exact charge conservation significantly impacts multiplicity fluctuations. The result depends strongly on the part of the system charge carried by the particles of interest. Along with the expected suppression of fluctuations for large…
Betting markets are gaining in popularity. Mean beliefs generally differ from prices in prediction markets. Logarithmic utility is employed to study the risk and return adjustments to prices. Some consequences are described. A modified…
We study risk-sharing equilibria with general convex costs on the agents' trading rates. For an infinite-horizon model with linear state dynamics and exogenous volatilities, we prove that the equilibrium returns mean-revert around their…
We propose a flexible stochastic framework for modeling the market share dynamics over time in a multiple markets setting, where firms interact within and between markets. Firms undergo stochastic idiosyncratic shocks, which contract their…
This short paper proposes a simple general equilibrium approach within a Markov-switching regime to explain how asymmetric information between lenders and speculators may lead to currency crises. The paper concludes by providing necessary…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
The expected utility hypothesis is a popular concept in economics that is useful for making decisions when the payoff is uncertain. In this paper, we investigate the implications of a fluctuation theorem in the theory of expected utility.…
We develop a theoretical framework to investigate the link between rising scale economies and stagnating productivity. Our model features heterogeneous firms, imperfect competition, and firm selection. We demonstrate that scale economies…