Related papers: Strategic complementarities as stochastic control …
The analysis of financial markets using models inspired by statistical physics offers a fruitful approach to understand collective and extreme phenomena [3, 14, 15] In this paper, we present a study based on a 2D Ising network model where…
Strategyproof mechanisms provide robust equilibrium with minimal assumptions about knowledge and rationality but can be unachievable in combination with other desirable properties such as budget-balance, stability against deviations by…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
We present two different approaches to stochastic integration in frictionless model free financial mathematics. The first one is in the spirit of It\^o's integral and based on a certain topology which is induced by the outer measure…
Statistical dynamics of financial systems is investigated, based on a model of a randomly coupled equation system driven by a stochastic Langevin force. Anticorrelations of price returns, and subdiffusion of prices is found from the model,…
Physical analogs have shown considerable promise for understanding the behavior of complex adaptive systems, including macroeconomics, biological systems, social networks, and electric power markets. Many of today's most challenging…
In this paper, a general stochastic model with controls applied at the moments when the random process hits the boundary of a given subset of the state set is proposed and studied. The general concept of the model is formulated and its…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
We introduce tools to capture the dynamics of three different pathways, in which the synchronization of human decision-making could lead to turbulent periods and contagion phenomena in financial markets. The first pathway is caused when…
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…
In the era of a growing population, systemic changes to the world, and the rising risk of crises, humanity has been facing an unprecedented challenge of resource scarcity. Confronting and addressing the issues concerning the scarce…
Financial crises are a recurrent phenomenon with important effects on the real economy. The financial system is inherently fragile and it is therefore of great importance to be able to measure and characterize its systemic stability.…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
The aim of this study is to contribute to the theory of exogenous economic shocks and their equivalents in an attempt to explain business cycle fluctuations, which still do not have a clear explanation. To this end the author has developed…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
Competition is a main tenet of economics, and the reason is that a perfectly competitive equilibrium is Pareto-efficient in the absence of externalities and public goods. Whether a product is selected in a market crucially relates to its…
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including electric power markets and the power systems they intend to govern. Market-based control is founded on the conjecture that…