Related papers: Strategic complementarities as stochastic control …
We analyze the efficiency of markets with friction, particularly power markets. We model the market as a dynamic system with $(d_t;\,t\geq 0)$ the demand process and $(s_t;\,t\geq 0)$ the supply process. Using stochastic differential…
A simple spin system is constructed to simulate dynamics of asset prices and studied numerically. The outcome for the distribution of prices is shown to depend both on the dimension of the system and the introduction of price into the link…
This paper studies the economic role of persistent dispersion in allocations across agents. We develop a tractable model in which firms allocate resources under imperfect information and behavioral updating, generating sustained…
Do firm dynamics matter for the transmission of monetary policy? Empirically, the startup rate declines following a monetary contraction, while the exit rate increases, both of which reduce aggregate employment. I present a model that…
This paper is devoted to a high-dimensional mixed leadership stochastic differential game on a finite horizon in feedback information mode, where the control variables enter into the diffusion term of state equation. A verification theorem…
This paper deals with the stability properties of a closed market, where capital and labour force are acting like a predator-prey system in population-dynamics. The spatial movement of the capital and labour force are taken into account by…
We propose a dynamic model of dependence structure between financial institutions within a financial system and we construct measures for dependence and financial instability. Employing Markov structures of joint credit migrations, our…
In this paper, we are interested in evaluating the resilience of financial portfolios under extreme economic conditions. Therefore, we use empirical measures to characterize the transmission process of macroeconomic shocks to risk…
A simple quantitative example of a reflexive feedback process and the resulting price dynamics after an exogenous price shock to a financial network is presented. Furthermore, an outline of a theory that connects financial reflexivity,…
A stochastic model with a continuum of economic agents often involves shocks at both macro and micro levels. This can be formalized by a continuum of random variables that are conditionally independent given the macro level shocks. Based on…
In this study, we introduce a physical model inspired by statistical physics for predicting price volatility and expected returns by leveraging Level 3 order book data. By drawing parallels between orders in the limit order book and…
For centuries, national economies created wealth by engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also create systemic risk: economic shocks,…
Common asset holdings are widely believed to have been the primary vector of contagion in the recent financial crisis. We develop a network approach to the amplification of financial contagion due to the combination of overlapping…
The timing of strategic exit is one of the most important but difficult business decisions, especially under competition and uncertainty. Motivated by this problem, we examine a stochastic game of exit in which players are uncertain about…
In this paper, we consider a generic interest rate market in the presence of roll-over risk, which generates spreads in spot/forward term rates. We do not require classical absence of arbitrage and rely instead on a minimal market viability…
In this work, we study a generalized Fisher market model that incorporates social influence. In this extended model, a buyer's utility depends not only on their own resource allocation but also on the allocations received by their…
The stability analysis of socioeconomic systems has been centered on answering whether small perturbations when a system is in a given quantitative state will push the system permanently to a different quantitative state. However, typically…
We study the relaxation dynamics of the bid-ask spread and of the midprice after a sudden, large variation of the spread, corresponding to a temporary crisis of liquidity in a double auction financial market. We find that the spread decays…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
Financial markets are a typical example of complex systems where interactions between constituents lead to many remarkable features. Here, we show that a pairwise maximum entropy model (or auto-logistic model) is able to describe switches…