Related papers: From Rational Bubbles to Crashes

The consideration of nonstandard models of the real numbers and the definition of a qualitative ordering on those models provides a generalization of the principle of maximization of expected utility. It enables the decider to assign…

In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…

This paper discusses and analyzes a class of likelihood models which are based on two distributional innovations in financial models for stock returns. That is, the notion that the marginal distribution of aggregate returns of log-stock…

Bubbles drive gas and chemical transfers in various industrial and geophysical contexts, in which flows are typically turbulent. As gas and chemical transfers are bubble size dependent, their quantification requires a prediction of bubble…

Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously…

This paper highlights the role of risk neutral investors in generating endogenous bubbles in derivatives markets. We find that a market for derivatives, which has all the features of a perfect market except completeness and has some risk…

We study risk-sharing equilibria with general convex costs on the agents' trading rates. For an infinite-horizon model with linear state dynamics and exogenous volatilities, we prove that the equilibrium returns mean-revert around their…

The bubble is a controversial and important issue. Many methods which based on the rational expectation have been proposed to detect the bubble. However, for some developing countries, epically China, the asset markets are so young that for…

We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…

Why are human societies unstable? Theories based on the observation of recurring patterns in historical data indicate that economic inequality, as well as social factors are key drivers. So far, models of this phenomenon are more…

This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of…

In this paper, we deal with Reflected Backward Stochastic Differential Equations for which the constraint is not on the paths of the solution but on its law as introduced by Briand, Elie and Hu in [3]. We extend the recent work [2] of…

The Sornette-Ide differential equation of herding and rational trader behaviour together with very small random noise is shown to lead to crashes or bubbles where the price change goes to infinity after an unpredictable time. About 100 time…

We introduce a new definition of speculative bubbles in discrete-time models based on the discounted stock price losing mass at some finite drop-down under an equivalent martingale measure. We provide equivalent probabilistic…

This paper studies the equilibrium price of a continuous time asset traded in a market with heterogeneous investors. We consider a positive mean reverting asset and two groups of investors who have different beliefs on the speed of mean…

Bubeck and Sellke (2021) pose as an open problem the connection between the law of robustness and robust generalization. The law of robustness states that overparameterization is necessary for models to interpolate robustly; in particular,…

In this paper, a quantum model for the binomial market in finance is proposed. We show that its risk-neutral world exhibits an intriguing structure as a disk in the unit ball of ${\bf R}^3,$ whose radius is a function of the risk-free…

We propose a parameterization for contributions of an infinite set of diagrams (bubble chains) into physical observables represented as integrals of running coupling constant over the finite region in momentum space. The perturbation theory…

The starting point of this paper is the so-called Robust Positive Expectation (RPE) Theorem, a result which appears in literature in the context of Simultaneous Long-Short stock trading. This theorem states that using a combination of two…

The curvature perturbation in a model of constant-roll (CR) inflation is interpreted in view of the logarithmic duality discovered in Ref. [1] according to the $\delta N$ formalism. We confirm that the critical value…