Related papers: Speculative bubbles and fat tail phenomena in a he…
We discuss a family of models expressed by nonlinear differential equation systems describing closed market societies in the presence of taxation and redistribution. We focus in particular on three example models obtained in correspondence…
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…
The dynamics of many socioeconomic systems is determined by the decision making process of agents. The decision process depends on agent's characteristics, such as preferences, risk aversion, behavioral biases, etc.. In addition, in some…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
Multi-agent models have been used in many contexts to study generic collective behavior. Similarly, complex networks have become very popular because of the diversity of growth rules giving rise to scale-free behavior. Here we study…
Agent-based models (ABMs) are fit to model heterogeneous, interacting systems like financial markets. We present the latest advances in Evology: a heterogeneous, empirically calibrated market ecology agent-based model of the US stock…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
We derive a system of stochastic differential equations simulating the dynamics of the three agent groups with herding interaction. Proposed approach can be valuable in the modeling of the complex socio-economic systems with similar…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
In complex financial systems, the sector structure and volatility clustering are respectively important features of the spatial and temporal correlations. However, the microscopic generation mechanism of the sector structure is not yet…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization of a…
Volatility is a key measure of risk in financial analysis. The high volatility of one financial asset today could affect the volatility of another asset tomorrow. These lagged effects among volatilities - which we call volatility spillovers…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
The three-state agent-based 2D model of financial markets as proposed by Giulia Iori has been extended by introducing increasing trust in the correctly predicting agents, a more realistic consultation procedure as well as a formal…
This paper investigates how two important sources of risk -- market tail risk and extreme market volatility risk -- are priced into the cross-section of asset returns across various investment horizons. To identify such risks, we propose a…
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…
In this short paper we define the wealth process in a spin model for market microstructure, for individual agents and in aggregate. The agents in our model try to balance their desire to belong to the local majority (herding behavior),…
We present an experimental and simulated model of a multi-agent stock market driven by a double auction order matching mechanism. Studying the effect of cumulative information on the performance of traders, we find a non monotonic…
A time series model for the FX dynamics is presented which takes into account structural peculiarities of the market, namely its heterogeneity and an information flow from long to short time horizons. The model emerges from an analogy…