Related papers: The Instability of Markets
This paper investigates whether a financial system can be made more stable if financial institutions share risk by exchanging contingent convertible (CoCo) debt obligations. The question is framed in a financial network model of debt and…
Power grids sustain modern society by supplying electricity and thus their stability is a crucial factor for our civilization. The dynamic stability of a power grid is usually quantified by the probability of its nodes' recovery to phase…
We show that a simple model of a spatially resolved evolving economic system, which has a steady state under simultaneous updating, shows stable oscillations in price when updated asynchronously. The oscillations arise from a gradual…
The paper proposes a framework for modeling and analysis of the dynamics of supply, demand, and clearing prices in power system with real-time retail pricing and information asymmetry. Real-time retail pricing is characterized by passing on…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Cryptocurrencies are examined through the asset flow equations and experimental asset markets. Since tangible value of a typical cryptocurrency is non-existent, the theory suggests that price will gravitate toward liquidity value, i.e., the…
I introduce a stability notion, dynamic stability, for two-sided dynamic matching markets where (i) matching opportunities arrive over time, (ii) matching is one-to-one, and (iii) matching is irreversible. The definition addresses two…
Trade networks, across which countries distribute their products, are crucial components of the globalized world economy. Their structure is strongly heterogeneous across products, given the different features of the countries which buy and…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
We consider the stability of a system of equations which are a singular perturbation of the incompressible rigid-plastic flow equations used to model granular flow. A linear stability analysis shows that solutions of these equations are…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
We use rank correlations as distance functions to establish the interconnectivity between stock returns, building weighted signed networks for the stocks of seven European countries, the US and Japan. We establish the theoretical…
We study the diffusion of shocks in the global financial cycle and global liquidity conditions to emerging and developing economies. We show that the classification according to their external trade patterns (as commodities' net exporters…
A class of polynomial dynamical systems called complex-balanced are locally stable and conjectured to be globally stable. In general, complex-balancing is not a robust property, i.e., small changes in parameter values may result in the loss…
The aim of this paper is to identify the determinants of international stock markets integration. Intuitively we selected a great number of factors linked to financial integration. Then, we developed an international asset-pricing model…
While interdependent systems have usually been associated with increased fragility, we show that strengthening the interdependence between dynamical processes on different networks can make them more robust. By coupling the dynamics of…
We study the relation between stock price changes and the difference in the number of sell and buy orders. Using a soft spin model, we describe the price impact of order imbalances and find an analogy to the fluctuation-dissipation theorem…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
A generalized continuous economic model is proposed for random markets. In this model, agents interact by pairs and exchange their money in a random way. A parameter controls the effectiveness of the transactions between the agents. We show…