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Stock correlations is crucial to asset pricing, investor decision-making, and financial risk regulations. However, microscopic explanation based on agent-based modeling is still lacking. We here propose a model derived from minority game…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
We model the dynamics of social structure by a simple interacting particle system. The social standing of an individual agent is represented by an integer-valued fitness that changes via two offsetting processes. When two agents interact…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
Suppose you are a fund manager with \$100 million to deploy and two years to invest it. A deal comes across your desk that looks appealing but costs \$50 million -- half of your available capital. Should you take it, or wait for something…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
Capital allocation is a procedure used to assess the risk contributions of individual risk components to the total risk of a portfolio. While the conditional tail expectation (CTE)-based capital allocation is arguably the most popular…
The major perspective of this paper is to provide more evidence regarding how "quickly", in different macroeconomic states, companies adjust their capital structure to their leverage targets. This study extends the empirical research on the…
This study presents an analytical approach to sector rotation, leveraging both factor models and fundamental metrics. We initiate with a systematic classification of sectors, followed by an empirical investigation into their returns.…
We study the well-known sociological phenomenon of gang aggregation and territory formation through an interacting agent system defined on a lattice. We introduce a two-gang Hamiltonian model where agents have red or blue affiliation but…
In a co-evolutionary context, the survive probability of individual elements of a system depends on their relation with their neighbors. The natural selection process depends on the whole population, which is determined by local events…
Heterogeneity of economic agents is emphasized in a new trend of macroeconomics. Accordingly the new emerging discipline requires one to replace the production function, one of key ideas in the conventional economics, by an alternative…
Financial structures such as securitisations, insurance contracts, and other hierarchical claims systems can be interpreted as deterministic allocation mechanisms acting on stochastic inflow processes. This paper develops a general…
Growth of business firms or companies has been a subject of intensive research over a century. However, there still remains controversy about the basic mechanisms of their growth. Inspired by previous work on scaling laws in other systems,…
A dynamical model for the distribution of resources between competing agents is studied. While global competition leads to the accumulation of all the resources by a single agent, local competition allows for a wider resource distribution.…
We propose a stochastic model of evolution of wealth in a society of economic agents. In the model, an agent can be in two states: inactive and active. Transitions between the states occur at random time intervals. In the active state, the…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
We consider a model of nomadic agents exploring and competing for time-varying location-specific resources, arising in crowdsourced transportation services, online communities, and in traditional location based economic activity. This model…