Related papers: Rational Bubbles Attached to Real Assets
A slender object undergoing an axial compression will buckle to alleviate the stress. Typically the morphology of the deformed object depends on the bending stiffness for solids, or the viscoelastic properties for liquid threads. We study a…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
It is already understood that the increasing observational evidence for an open Universe can be reconciled with inflation if our horizon is contained inside one single huge bubble nucleated during the inflationary phase transition. In this…
We develop a strong diagnostic for bubbles and crashes in bitcoin, by analyzing the coincidence (and its absence) of fundamental and technical indicators. Using a generalized Metcalfe's law based on network properties, a fundamental value…
We present a heuristic argument for the propensity of Topological Data Analysis (TDA) to detect early warning signals of critical transitions in financial time series. Our argument is based on the Log-Periodic Power Law Singularity (LPPLS)…
We give a sufficient condition for a Brauer-Severi surface bundle over a rational 3-fold to not be stably rational. Additionally, we present an example that satisfies this condition and demonstrate the existence of families of Brauer-Severi…
A variety is unirational if it is dominated by a rational variety. A variety is rationally connected if two general points can be joined by a rational curve. This paper aims to show that the two notions can cooperate and, building on…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
Identifying unambiguously the presence of a bubble in an asset price remains an unsolved problem in standard econometric and financial economic approaches. A large part of the problem is that the fundamental value of an asset is, in…
There are two major streams of literature on the modeling of financial bubbles: the strict local martingale framework and the Johansen-Ledoit-Sornette (JLS) financial bubble model. Based on a class of models that embeds the JLS model and…
Using a recently introduced rational expectation model of bubbles, based on the interplay between stochasticity and positive feedbacks of prices on returns and volatility, we develop a new methodology to test how this model classifies 9…
Game theoretic equilibria are mathematical expressions of rationality. Rational agents are used to model not only humans and their software representatives, but also organisms, populations, species and genes, interacting with each other and…
We study how experience with asset price bubbles changes the trading strategies of reinforcement learning (RL) traders and ask whether the change in trading strategies helps to prevent future bubbles. We train the RL traders in a…
Emerging markets such as India provide investors with returns far greater than those in developed markets; taking the average returns from the period 1995 to 2014 the returns are 4.714% to 3.276% of the developed market. The majority of…
The Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large…
Training language models with rationales augmentation has been shown to be beneficial in many existing works. In this paper, we identify that such a prevailing view does not hold consistently. We conduct comprehensive investigations to…
Proponents of behavioral finance have identified several "puzzles" in the market that are inconsistent with rational finance theory. One such puzzle is the "excess volatility puzzle". Changes in equity prices are too large given changes in…
Cavitation and bubble dynamics are central concepts in engineering, the natural sciences, and the mathematics of fluid mechanics. Due to the nonlinear nature of their dynamics, the governing equations are not fully solvable. Here, the…
A new concept called biased derivative is proposed. It has a potential to better understand and model some aspects of dynamical systems associated with creating bubbles.
This paper develops a model that incorporates the presence of stochastic arbitrage explicitly in the Black--Scholes equation. Here, the arbitrage is generated by a stochastic bubble, which generalizes the deterministic arbitrage model…