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Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…
I examine whether the imposition of fiduciary duty on municipal advisors affects bond yields and advising fees. Using a difference-in-differences analysis, I show that bond yields reduce by $\sim$9\% after the imposition of the SEC…
Discount is the difference between the face value of a bond and its present value. I propose an arbitrage-free dynamic framework for discount models, which provides an alternative to the Heath--Jarrow--Morton framework for forward rates. I…
This paper investigates large fluctuations of Locational Marginal Prices (LMPs) in wholesale energy markets caused by volatile renewable generation profiles. Specifically, we study events of the form $\mathbb{P} \Big ( \mathbf{LMP} \notin…
Following a Geometrical Brownian Motion extension into an Irrational Fractional Brownian Motion model, we re-examine agent behaviour reacting to time dependent news on the log-returns thereby modifying a financial market evolution. We…
This paper presents evidence on the granular nature of firms' network of foreign suppliers and studies its implications for the impact of supplier shocks on domestic firms' performance. To demonstrate this, I use customs level information…
We prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to…
Traditional electric energy markets do not explicitly model generator contingencies. To improve the representation of resources and to enhance the modeling of uncertainty, existing markets are moving in the direction of including generator…
As a firm varies the price of a product, consumers exhibit reference effects, making purchase decisions based not only on the prevailing price but also the product's price history. We consider the problem of learning such behavioral…
The transition from static to dynamic friction when an elastic body is slid over another is now known to result from the motion of interface rupture fronts. These fronts may be either crack-like or pulse-like, with the latter involving…
Cryptocurrency, the most controversial and simultaneously the most interesting asset, has attracted many investors and speculators in recent years. The visibly significant market capitalization of cryptos also motivates modern financial…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
This paper develops a strategic model of trade between two regions in which, depending on the relation among output, financial resources and transportation costs, the adjustment of prices towards an equilibrium is studied. We derive…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
In a recent Nature paper, Gabaix et al. \cite{Gabaix03} presented a theory to explain the power law tail of price fluctuations. The main points of their theory are that volume fluctuations, which have a power law tail with exponent roughly…
This paper analyzes the hypothesis that returns play a risk-compensating role in the market for corporate revolving lines of credit. Specifically, we test whether borrower risk and the expected return on these debt instruments are…
Contracts for Difference (CfDs) are forwards on the spread between an area price and the system price. Together with the system price forwards, these products are used to hedge the area price risk in the Nordic electricity market. The CfDs…
Can uncertainty about credit availability trigger a slowdown in real activity? This question is answered by using a novel method to identify shocks to uncertainty in access to credit. Time-variation in uncertainty about credit availability…
We present a general equilibrium macro-finance model with a positive feedback loop between capital investment and land price. As leverage is relaxed beyond a critical value, through the financial accelerator, a phase transition occurs from…