Related papers: Recurrent Stochastic Fluctuations with Financial S…
We develop a stochastic macro-financial model in continuous time by integrating two specifications of the Keen economic framework with a financial market driven by a jump-diffusion process. The economic block of the model combines monetary…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
In both finance and economics, quantitative models are usually studied as isolated mathematical objects --- most often defined by very strong simplifying assumptions concerning rationality, efficiency and the existence of disequilibrium…
We consider a dynamical system which has a stable attractor and which is perturbed by an additive noise. Under some quite typical conditions, the fluctuations from the attractor are intermittent and have a probability distribution with…
This paper expands on stochastic volatility models by proposing a data-driven method to select the macroeconomic events most likely to impact volatility. The paper identifies and quantifies the effects of macroeconomic events across…
In the wake of the 2008 financial crisis the role of strongly interconnected markets in fostering systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to deleterious cascades of supply…
We investigate the full dynamics of capital allocation and wealth distribution of heterogeneous agents in a frictional economy during booms and busts using tools from mean-field games. Two groups in our models, namely the expert and the…
The Black-Scholes implied volatility skew at the money of SPX options is known to obey a power law with respect to the time-to-maturity. We construct a model of the underlying asset price process which is dynamically consistent to the power…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
This paper presents a model that studies the impact of credit expansions arising from increases in collateral values or lower interest rate policies on long-run productivity and economic growth in a two-sector endogenous growth economy,…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
When making decisions under risk, people often exhibit behaviors that classical economic theories cannot explain. Newer models that attempt to account for these irrational behaviors often lack neuroscience bases and require the introduction…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…