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Using theory and experiments, this paper shows that the difficulty of making tradeoffs offers a parsimonious explanation for a wide range of behavioral phenomena. We develop a model of imprecise comparisons applicable to multiattribute,…
The properties of Maximum Likelihood estimator in mixed causal and noncausal models with a generalized Student's t error process are reviewed. Several known existing methods are typically not applicable in the heavy-tailed framework. To…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the affine models, we define a new specification for the…
We consider Stochastic Volatility processes with heavy tails and possible long memory in volatility. We study the limiting conditional distribution of future events given that some present or past event was extreme (i.e. above a level which…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
Using a model of wealth distribution where traders are characterized by quenched random saving propensities and trade among themselves by bipartite transactions, we mimic the enhanced rates of trading of the rich by introducing the…
Financial volatility obeys two fascinating empirical regularities that apply to various assets, on various markets, and on various time scales: it is fat-tailed (more precisely power-law distributed) and it tends to be clustered in time.…
Extreme events and the heavy tail distributions driven by them are ubiquitous in various scientific, engineering and financial research. They are typically associated with stochastic instability caused by hidden unresolved processes.…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
The most popular approach in extreme value statistics is the modelling of threshold exceedances using the asymptotically motivated generalised Pareto distribution. This approach involves the selection of a high threshold above which the…
We introduce a new system of stochastic differential equations which models dependence of market beta and unsystematic risk upon size, measured by market capitalization. We fit our model using size deciles data from Kenneth French's data…
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive…
We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
A non-fungible token (NFT) market is a new trading invention based on the blockchain technology which parallels the cryptocurrency market. In the present work we study capitalization, floor price, the number of transactions, the…
Economic and financial models -- such as vector autoregressions, local projections, and multivariate volatility models -- feature complex dynamic interactions and spillovers across many time series. These models can be integrated into a…