Related papers: Rational Bubbles Attached to Real Assets
Noncausal, or anticipative, heavy-tailed processes generate trajectories featuring locally explosive episodes akin to speculative bubbles in financial time series data. For $(X_t)$ a two-sided infinite $\alpha$-stable moving average (MA),…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
Analytical considerations and potential flow numerical simulations of the pinch-off of bubbles at high Reynolds numbers reveal that the bubble minimum radius, $r_n$, decreases as $\tau\propto r_n^2 \, (-\ln{r_n^2})^{1/2}$, where $\tau$ is…
This paper demonstrates the existence of a finite set of equilibria in the case of the indeterminacy of linear rational expectations models. The number of equilibria corresponds to the number of ways to select n eigenvectors among a larger…
When pricing options, there may be different views on the instantaneous mean return of the underlying price process. According to Black (1972), where there exist heterogeneous views on the instantaneous mean return, this will result in…
Calculations are presented to describe the dynamic of a growing bubble in a single and simple formulation for R(t). The calculations show clearly that the behavior of the growing bubble is exponentially increasing with the time constant…
In this paper, we study the dynamics of a finite number of spherical bubbles in a compressible fluid within a bounded open domain of R 3 . The fluid-bubble interaction is described by a system of nonlinear partial differential equations…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization of a…
A linear bubble model of grain growth is introduced to study the conditions under which an isolated grain can grow to a size much larger than the surrounding matrix average (abnormal growth). We first consider the case of bubbles of two…
Some of the peculiar electrodynamical effects associated with gauged ``dimension bubbles'' are presented. Such bubbles, which effectively enclose a region of 5d spacetime, can arise from a 5d theory with a compact extra dimension. Bubbles…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Using duality theory techniques we derive simple, closed-form formulas for bounding the optimal revenue of a monopolist selling many heterogeneous goods, in the case where the buyer's valuations for the items come i.i.d. from a uniform…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
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…
The accurate description of the growth or dissolution dynamics of a soluble gas bubble in a super- or undersaturated solution requires taking into account a number of physical effects that contribute to the instantaneous mass transfer rate.…
The purpose of this paper is to translate positivity properties of the tangent bundle (and the anti-canonical bundle) of an algebraic manifold into existence and movability properties of rational curves and to investigate the impact on the…
Systemic risk in banking systems remains a crucial issue that it has not been completely understood. In our toy model, banks are exposed to two sources of risks, namely, market risk from their investments in assets external to the banking…
We propose an alternative inflationary universe scenario in the context of Randall-Sundrum braneworld cosmology. In this new scenario the existence of extra-dimension(s) plays an essential role. First, the brane universe is initially in the…
In the collective-risk social dilemma, players lose their personal endowments if contributions to the common pool are too small. This fact alone, however, does not always deter selfish individuals from defecting. The temptations to…
The use of equilibrium models in economics springs from the desire for parsimonious models of economic phenomena that take human reasoning into account. This approach has been the cornerstone of modern economic theory. We explain why this…