Related papers: Information-Theoretic Approach to Financial Market…
How much one has learned from an experiment is quantifiable by the information gain, also known as the Kullback-Leibler divergence. The narrowing of the posterior parameter distribution $P(\theta|D)$ compared with the prior parameter…
The optimal (`equilibrium') macroscopic properties of an economy with $N$ industries endowed with different technologies, $P$ commodities and one consumer are derived in the limit $N\to\infty$ with $n=N/P$ fixed using the replica method.…
The paper moves a step towards the full integration of statistical mechanics and information theory. Starting from the assumption that the thermodynamical system is composed by particles whose quantized energies can be modelled as…
We describe a bottom-up framework, based on the identification of appropriate order parameters and determination of phase diagrams, for understanding progressively refined agent-based models and simulations of financial markets. We…
We study the problem of information provision by a strategic central planner who can publicly signal about an uncertain infectious risk parameter. Signalling leads to an updated public belief over the parameter, and agents then make…
An agent-based model for firms' dynamics is developed. The model consists of firm agents with identical characteristic parameters and a bank agent. Dynamics of those agents is described by their balance sheets. Each firm tries to maximize…
We develop a risk-neutral spot and equity option market simulator for a single underlying, under which the joint market process is a martingale. We leverage an efficient low-dimensional representation of the market which preserves no static…
The use of intelligent systems for stock market predictions has been widely established. In this paper, we investigate how the seemingly chaotic behavior of stock markets could be well represented using several connectionist paradigms and…
Information theory is a mathematical theory of learning with deep connections with topics as diverse as artificial intelligence, statistical physics, and biological evolution. Many primers on information theory paint a broad picture with…
We introduce a simple model for addressing the controversy in the study of financial systems, sometimes taken as brownian-like processes and other as critical systems with fluctuations of arbitrary magnitude. The model considers a…
We propose an information-theoretic framework for analyzing control systems based on the close relationship of controllers to communication channels. A communication channel takes an input state and transforms it into an output state. A…
We consider idealized financial markets in which price paths of the traded securities are cadlag functions, imposing mild restrictions on the allowed size of jumps. We prove the existence of quadratic variation for typical price paths,…
We study here numerically the behavior of an ideal gas like model of markets having only one non-consumable commodity. We investigate the behavior of the steady-state distributions of money, commodity and total wealth, as the dynamics of…
Real-world social and/or operational networks consist of agents with associated states, whose connectivity forms complex topologies. This complexity is further compounded by interconnected information layers, consisting, for instance,…
In this paper we introduce a simple model for a financial market characterized by a single stock or good and an interplay between two different traders populations, chartists and fundamentalists, which determine the price dynamic of the…
We propose a kinetic model to describe the dynamical evolution of wealth and knowledge in national and global markets, starting from a microscopic description of individual interactions. The model is built upon interaction rules that…
We generalize the recently proposed quantum model for the stock market by Zhang and Huang to make it consistent with the discrete nature of the stock price. In this formalism, the price of the stock and its trend satisfy the generalized…
We introduce a minimal opinion formation model, which is quite flexible and can reproduce a broad variety of the existing micro-influence assumptions and models. At the same time, the model can be easily calibrated on real data, upon which…
We use a $\phi^{4}$ quantum field theory with inhomogeneous couplings and explicit symmetry-breaking to model an ensemble of financial time series from the S$\&$P 500 index. The continuum nature of the $\phi^4$ theory avoids the…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…