Related papers: The Instability of Markets
The possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
For nearly every major stock market there exist equity and implied volatility indices. These play important roles within finance: be it as a benchmark, a measure of general uncertainty or a way of investing or hedging. It is well known in…
An open market is a subset of an entire equity market composed of a certain fixed number of top capitalization stocks. Though the number of stocks in the open market is fixed, the constituents of the market change over time as each…
The theory of complex networks and of disordered systems is used to study the stability and dynamical properties of a simple model of material flow networks defined on random graphs. In particular we address instabilities that are…
Securitization has become prevalent in many countries, and has substantial impact on government monetary policy and fiscal policy which have not yet been adequately analyzed in the existing literature. This article develops optimal…
This paper introduces forward-looking measures of the network connectedness of fears in the financial system, arising due to the good and bad beliefs of market participants about uncertainty that spreads unequally across a network of banks.…
This paper analyzes nonlinearities in the international transmission of financial shocks originating in the US. To do so, we develop a flexible nonlinear multi-country model. Our framework is capable of producing asymmetries in the…
General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature non-convexities in…
In a recent article [Nature 421, 130 (2003)], Plerou, Gopikrishnan and Stanley report some evidence for an intriguing two-phase behavior of financial markets when studying the distribution of volume imbalance conditional to the local…
Complex evolving systems such as the biosphere, ecosystems and societies exhibit sudden collapses, for reasons that are only partially understood. Here we study this phenomenon using a mathematical model of a system that evolves under…
We investigate the possibility of completing financial markets in a model with no exogenous probability measure and market imperfections. A necessary and sufficient condition is obtained for such extension to be possible.
Nearly one-half of all trades in financial markets are executed by high-speed, autonomous computer programs -- a type of trading often called high-frequency trading (HFT). Although evidence suggests that HFT increases the efficiency of…
How does supply uncertainty affect the structure of supply chain networks? To answer this question we consider a setting where retailers and suppliers must establish a costly relationship with each other prior to engaging in trade.…
We are investigating a paradigm of instability in coalition forming among countries, which indeed is intrinsic to any collection of individual groups or other social aggregations. Coalitions among countries are formed by the respective…
This paper develops a dynamic equilibrium model of the insurance market that jointly characterizes insurers' underwriting, investment, recapitalization, and dividend policies under model uncertainty and financial frictions. Competitive…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
In order to emphasize cross-correlations for fluctuations in major market places, series of up and down spins are built from financial data. Patterns frequencies are measured, and statistical tests performed. Strong cross-correlations are…