Related papers: Premium Calculation Based on Physical Principles
We unify two recent results concerning equilibration in quantum theory. We first generalise a proof of Reimann [PRL 101,190403 (2008)], that the expectation value of 'realistic' quantum observables will equilibrate under very general…
General equilibrium equations in economics play the same role with many-body Newtonian equations in physics. Accordingly, each solution of the general equilibrium equations can be regarded as a possible microstate of the economic system.…
According to the fundamental theorems of welfare economics, any competitive equilibrium is Pareto efficient. Unfortunately, competitive equilibrium prices only exist under strong assumptions such as perfectly divisible goods and convex…
This paper deals with N-person nonzero-sum discrete-time Markov games under a probability criterion, in which the transition probabilities and reward functions are allowed to vary with time. Differing from the existing works on the expected…
Through extended consideration of two wide classes of case studies -- dilute gases and linear systems -- I explore the ways in which assumptions of probability and irreversibility occur in contemporary statistical mechanics, where the…
We use the theory of cooperative games for the design of fair insurance contracts. An insurance contract needs to specify the premium to be paid and a possible participation in the benefit (or surplus) of the company. It results from the…
Given a batch of human computation tasks, a commonly ignored aspect is how the price (i.e., the reward paid to human workers) of these tasks must be set or varied in order to meet latency or cost constraints. Often, the price is set…
In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time…
We provide a formal framework accounting for a widespread idea in the theory of economic design: analytically established incompatibilities between given axioms should be qualified by the likelihood of their violation. We define the degree…
In this paper we state the fundamental principles of the gauge approach to financial economics and demonstrate the ways of its application. In particular, modelling of realistic price processes is considered for an example of S&P500 market…
Under the same assumptions made by Mas-Colell et al. (1995), I develop a short, simple, and complete proof of existence of equilibrium prices based on excess demand functions. The result is obtained by applying the Brouwer fixed point…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We discuss the possibility of using generalized canonical distributions, i.e. using other factors than $\exp(-\beta E)$, in order to compute the equilibrium properties of physical systems. It will be show that some other choices can, in…
Most decision theories, including expected utility theory, rank dependent utility theory and cumulative prospect theory, assume that investors are only interested in the distribution of returns and not in the states of the economy in which…
We consider a simple model of a closed economic system where the total money is conserved and the number of economic agents is fixed. In analogy to statistical systems in equilibrium, money and the average money per economic agent are…
A multiclass queue with many servers is considered, where customers make a join-or-leave decision upon arrival based on queue length information, without knowing the scheduling policy or the state of other queues. A game theoretic…
We obtain a maximum principle, and "a priori" upper estimates for solutions of a class of non linear singular elliptic differential inequalities on Riemannian manifolds under the sole geometrical assumption of volume growth conditions.…
This is an invited article for the Discussion and Debate special issue of The European Physical Journal Special Topics on the subject "Can Economics Be a Physical Science?" The first part of the paper traces the personal path of the author…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
Dynamical equations describing physical systems at statistical equilibrium are commonly extended by mathematical tools called "thermostats". These tools are designed for sampling ensembles of statistical mechanics. We propose a dynamic…