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For the last two decades, most financial markets have undergone an evolution toward electronification. The market for corporate bonds is one of the last major financial markets to follow this unavoidable path. Traditionally quote-driven…

Climate change has driven the market to seek new ways of raising funds to mitigate its effects. One such innovation is the emergence of Green Bonds financial assets specifically designed to support sustainable projects. This study explores…

Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…

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…

We employ a 2x3 factorial experiment to study two central factors in the design of prediction markets (PMs) for idea evaluation: the overall design of the PM, and the elasticity of market prices set by a market maker. The results show that…

The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social…

We present a limits-to-arbitrage model to study the impact of securitization, leverage and credit risk protection on the cyclicity of bank credit. In a stable bank credit situation, no cycles of credit expansion or contraction appear.…

An increase in energy production from renewable energy sources is viewed as a crucial achievement in most industrialized countries. The higher variability of power production via renewables leads to a rise in ancillary service costs over…

A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…

Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…

We give a stochastic microscopic modelling of stock markets driven by continuous double auction. If we take into account the mimetic behavior of traders, when they place limit order, our virtual markets shows the power-law tail of the…

We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…

We review the main changes in the interbank market after the financial crisis started in August 2007. In particular, we focus on the fixed income market and we analyse the most relevant empirical evidences regarding the divergence of the…

We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds…

This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…

The classical theory of efficient allocations of an aggregate endowment in a pure-exchange economy has hitherto primarily focused on the Pareto-efficiency of allocations, under the implicit assumption that transfers between agents are…

First passage models, where corporate assets undergo a random walk and default occurs if the assets fall below a threshold, provide an attractive framework for modeling the default process. Recently such models have been generalized to…

In economic studies and popular media, interest rates are routinely cited as a major factor behind commodity price fluctuations. At the same time, the transmission channels are far from transparent, leading to long-running debates on the…

This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…

The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…