Related papers: Relating debt and currency crises -- towards a gen…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
This paper is devoted to solving a time-inconsistent risk-sensitive control problem with parameter $\e$ and its limit case ($\e\rightarrow0^+$) for countable-stated Markov decision processes (MDPs for short). Since the cost functional is…
General equilibrium is the dominant theoretical framework for economic policy analysis at the level of the whole economy. In practice, general equilibrium treats economies as being always in equilibrium, albeit in a sequence of equilibria…
This paper proposes an exchange rate forecasting method by using the grey relative combination approach of chaos wavelet SVM-Markov model. The problem of short-term forecast of exchange rate by using the comprehensive method of the phase…
Consider the problem of a government that wants to reduce the debt-to-GDP (gross domestic product) ratio of a country. The government aims at choosing a debt reduction policy which minimises the total expected cost of having debt, plus the…
The Keen model is a mathematical model that describes the dynamic evolution of wages, employment, and debt based on the known Minsky's Financial Instability Hypothesis. It consists of three first order nonlinear ordinary differential…
We present a simple continuous-time model of clearing in financial networks. Financial firms are represented as "tanks" filled with fluid (money), flowing in and out. Once "pipes" connecting "tanks" are open, the system reaches the clearing…
This paper considers ideal gas-like models of trading markets, where each agent is identified as a gas molecule that interacts with others trading in elastic or money-conservative collisions. Traditionally, these models introduce different…
Credit and liquidity risks represent main channels of financial contagion for interbank lending markets. On one hand, banks face potential losses whenever their counterparties are under distress and thus unable to fulfill their obligations.…
This study analyzes public debts and deficits between European countries. The statistical evidence here seems in general to reveal that sovereign debts and government deficits of countries within European Monetary Unification-in average-…
Trust lies at the crux of most economic transactions, with credit markets being a notable example. Drawing on insights from the literature on coordination games and network growth, we develop a simple model to clarify how trust breaks down…
This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…
A problem of optimal debt management is modeled as a noncooperative game between a borrower and a pool of lenders, in infinite time horizon with exponential discount. The yearly income of the borrower is governed by a stochastic process.…
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
In this paper we consider a mean-field model of interacting diffusions for the monetary reserves in which the reserves are subjected to a self- and cross-exciting shock. This is motivated by the financial acceleration and fire sales…
The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
We relax a number of assumptions in Alexeev and Tapon (2012) in order to account for non-normally distributed, skewed, multi-regime, and leptokurtic asset return distributions. We calibrate a Markov-modulated Levy process model to equity…
In a money exchange process involving a seller and a buyer, we develop a straightforward model encompassing conservative, non-conservative, and systems with or without debt. Our model integrates the Fermi function to capture the behavior of…