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This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
The goal of this paper is to review some analytic techniques that are potentially useful to shed light on the determinacy question that arises in New Keynesian models as result of a combination of several monetary policy rules; in these…
Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher ($>$ two) order correlations, they offer a better measure…
Fuzziness and randomicity widespread exist in natural science, engineering, technology and social science. The purpose of this paper is to present a new logic - uncertain propositional logic which can deal with both fuzziness by taking…
Monetary risk measures are usually interpreted as the smallest amount of external capital that must be added to a financial position to make it acceptable. We propose a new concept: intrinsic risk measures and argue that this approach…
We propose a new class of monetary risk measures for assessing financial and ESG risk. The construction is based on classical shortfall risk measures with loss function replaced by a multi-attribute utility function. We present an extensive…
Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to…
This paper investigates the identification, the determinacy and the stability of ad hoc, "quasi-optimal" and optimal policy rules augmented with financial stability indicators (such as asset prices deviations from their fundamental values)…
A new class of rational parametrization has been developed and it was used to generate a new family of rational functions B-splines $\displaystyle{{\left({}^{\alpha}{\mathbf B}_{i}^{k} \right)}_{i=0}^{k}}$ which depends on an index $\alpha…
The seriousness of the current crisis urgently demands new economic thinking that breaks the austerity vs. deficit spending circle in economic policy. The core tenet of the paper is that the most important problems that natural and social…
Determining consumer preferences and utility is a foundational challenge in economics. They are central in determining consumer behaviour through the utility-maximising consumer decision-making process. However, preferences and utilities…
We develop theory leading to testing procedures for the presence of a change point in the intraday volatility pattern. The new theory is developed in the framework of Functional Data Analysis. It is based on a model akin to the stochastic…
This thesis presents the Conditional Value-at-Risk concept and combines an analysis that covers its application as a risk measure and as a vector norm. For both areas of application the theory is revised in detail and examples are given to…
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…
In an incomplete market, including liquidly-traded European options in an investment portfolio could potentially improve the expected terminal utility for a risk-averse investor. However, unlike the Sharpe ratio, which provides a concise…
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.…
We develop a new approach to solving classification problems, which is bases on the theory of coherent measures of risk and risk sharing ideas. The proposed approach aims at designing a risk-averse classifier. The new approach allows for…
There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy as developed by, e.g., Goodfriend and King (1997), Clarida et al. (1999),…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…