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There are no known exact formulas for the valuation of a number of exotic options, and this is particularly true for options under discrete monitoring and for American style options. Therefore, one usually recourses to a Monte Carlo…
Recent large scale structure observations, including COBE, have prompted many authors to discuss modifications of the standard Cold Dark Matter model. Two of these, a tilted spectrum and a gravitational wave contribution to COBE, are at…
We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential,…
A model of open economics composed of producers and speculators is investigated by numerical simulations. The capital flows from the environment to the producers and from them to the speculators. The price fluctuations are suppressed by the…
Trailing stop is a popular stop-loss trading strategy by which the investor will sell the asset once its price experiences a pre-specified percentage drawdown. In this paper, we study the problem of timing buy and then sell an asset subject…
In this paper, we design two chapters to discuss trade dynamics with heterogeneous fluctuations, contributing new insights to macroeconomic issues related to international trade. In the first chapter, we model general exchange rate…
In FX cash markets, market makers provide liquidity to clients for a wide variety of currency pairs. Because of flow uncertainty and market volatility, they face inventory risk. To mitigate this risk, they typically skew their prices to…
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX…
We introduce a formal framework for analyzing trades in financial markets. An exchange is where multiple buyers and sellers participate to trade. These days, all big exchanges use computer algorithms that implement double sided auctions to…
A microscopic dynamic model is here constructed and analyzed, describing the evolution of the income distribution in the presence of taxation and redistribution in a society in which also tax evasion and auditing processes occur. The focus…
Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered with…
In this paper, we provide an integrated systems modeling approach to analyzing global externalities from a microeconomic perspective. Various forms of policy (fiscal, monetary, etc.) have addressed flaws and market failures in models, but…
Secondary markets and resale are integral components of all emission trading systems. Despite the justification for these secondary trades, such as unpredictable demand, they may encourage speculation and result in the misallocation of…
A complete description of taxation systems that ensure sustainable economic development is given. These tax systems depend on production technologies and gross output volumes. Explicit formulas for such dependencies are found. In a…
This paper develops a comprehensive theoretical framework that imports concepts from stochastic thermodynamics to model price impact and characterize the feasibility of round-trip arbitrage in financial markets. A trading cycle is treated…
We describe a new model to simulate the dynamic interactions between market price and the decisions of two different kind of traders. They possess spatial mobility allowing to group together to form coalitions. Each coalition follows a…
We present a general derivation of the arbitrage-free pricing framework for multiple-currency collateralized products. We include the impact on option pricing of the policy adopted to fund in foreign currency, so that we are able to price…
We discuss the objectives of automation equipped with non-trivial decision making, or creating artificial intelligence, in the financial markets and provide a possible alternative. Intelligence might be an unintended consequence of…
This paper presents the application of Tokenlab, an agent-based modeling framework designed to analyze price dynamics and speculative behavior within token-based economies. By decomposing complex token systems into discrete agent…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…