Related papers: The Instability of Markets
Price fluctuations in financial markets can be characterized by L\'evy's stable distribution, which is supported by the generalized central limit system. When the stable parameters were estimated from four different stock markets in long…
We study a dynamical model of interconnected firms which allows for certain market imperfections and frictions, restricted here to be myopic price forecasts and slow adjustment of production. Whereas the standard rational equilibrium is…
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…
Exerting fluctuations is a part of our daily life: traffic noise, heartbeat, opinion poll, currency exchange rate, electrical current, chemical reactions - they all permanently fluctuate. One of the most important questions is why the…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
Modern physics has demonstrated that matter behaves very differently as it approaches the speed of light. This paper explores the implications of modern physics to the operation and regulation of financial markets. Information cannot move…
We take a look the changes of different asset prices over variable periods, using both traditional and spectral methods, and discover universality phenomena which hold (in some cases) across asset classes.
Global financial systems are undergoing strategic shifts as geopolitical tensions reshape international trade and payments. The United States (US)-China trade war, sanctions regimes, and rising concerns over the weaponization of financial…
Cryptocurrencies have evolved into an important asset class, providing a variety of benefits. However, they also present significant risks, such as market volatility and the potential for misuse in illegal activities. These risks underline…
In the wake of the 2008 financial crisis the role of strongly interconnected markets in fostering systemic instability has been increasingly acknowledged. Trade networks of commodities are susceptible to deleterious cascades of supply…
This short paper proposes a simple general equilibrium approach within a Markov-switching regime to explain how asymmetric information between lenders and speculators may lead to currency crises. The paper concludes by providing necessary…
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
Stablecoins have historically depegged due from par to large sales, possibly of speculative nature, or poor reserve asset quality. Using a global game which addresses both concerns, we show that the selling pressure on stablecoin holders…
Electricity markets differ in their ability to meet power imbalances in short notice in a controlled fashion. Relatively flexible markets have the ability to ramp up (or down) power flows across interties without compromising their ability…
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…
The international financial system is currently not yet prepared to face a foreseeable crisis mainly motivated by the dichotomy between the real economy and the virtual economy. Skepticism is widespread even when it comes to investments in…
Globalization processes interweave economic structures at a worldwide scale, trade playing a central role as one of the elemental channels of interaction among countries. Despite the significance of such phenomena, measuring economic…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…