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Standard models in economics stress the role of intelligent agents who maximize utility. However, there may be situations where, for some purposes, constraints imposed by market institutions dominate intelligent agent behavior. We use data…
In the last years new interdisciplinary approaches to economics and social science have been developed. A Thermodynamic approach to socio-economics has brought to a new interdisciplinary scientific field called econophysics. Why…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
A smart grid connects wind or solar or storage farms, fossil fuel plants, industrialor commercial loads, or load serving entities, modeled as stochastic dynamical systems. In each time period, they consume or supply electrical energy, with…
Mapping the economy to the some statistical physics models we get strong indications that, in contrary to the pure stock market, the stock market with derivatives could not self-regulate.
We discuss an incentivizing market and model-based approach to design the energy management and control systems which realize high-quality ancillary services in dynamic power grids. Under the electricity liberalization, such incentivizing…
Data-driven control is a powerful tool that enables the design and implementation of control strategies directly from data without explicitly identifying the underlying system dynamics. While various data-driven control techniques, such as…
The goal of this paper is to solve a class of stochastic optimal control problems numerically, in which the state process is governed by an It\^o type stochastic differential equation with control process entering both in the drift and the…
Perfectly rational decision-makers maximize expected utility, but crucially ignore the resource costs incurred when determining optimal actions. Here we propose an information-theoretic formalization of bounded rational decision-making…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
We introduce solvable stochastic dealer models, which can reproduce basic empirical laws of financial markets such as the power law of price change. Starting from the simplest model that is almost equivalent to a Poisson random noise…
A first attempt at obtaining market--directional information from a non--stationary solution of the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. We demonstrate…
We develop a cross-border market model for two countries based on a continuous trading mechanism, in which the transmission capacities that enable transactions between market participants from different countries are limited. Our market…
We propose a unified mean-field framework that bridges the dynamics of informal financial markets and formal markets governed by Limit Order Books (LOBs). Both settings are modeled as interacting particle systems on a 1D price lattice, with…
The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…
Extremal principles are fundamental in our interpretation of phenomena in nature. One of the best known examples is the second law of thermodynamics, governing most physical and chemical systems and stating the continuous increase of…
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
Transient stability analysis (TSA) plays an important role in power system analysis to investigate the stability of power system. Traditionally, transient stability analysis methods have been developed using time domain simulation by means…
Economic engineering is a new field wherein economic systems are modelled in the same manner as traditional mechanical and electrical engineering systems. In this paper, we use Newton's theory of motion as the basis for the theory of…