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Financial markets provide a natural quantitative lab for understanding some of the most advanced human behaviours. Among them is the use of mathematical tools known as financial instruments. Besides money, the two most fundamental financial…
The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems - and financial markets in particular - that are as predictive as…
For the first time ever, we analyze a unique public procurement database, which includes information about a number of bidders for a contract, a final price, an identification of a winner and an identification of a contracting authority for…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
In our simplified description `wealth' is money ($m$). A kinetic theory of gas like model of money is investigated where two agents interact (trade) selectively and exchange some amount of money between them so that sum of their money is…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
As a model of market price, we introduce a new type of random walk in a moving potential which is approximated by a quadratic function with its center given by the moving average of its own trace. The properties of resulting random walks…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
The Price equation describes the change in populations. Change concerns some value, such as biological fitness, information or physical work. The Price equation reveals universal aspects for the nature of change, independently of the…
It is still common wisdom amongst economists, politicians and lay people that economic growth is a necessity of our social systems, at least to avoid distributional conflicts. This paper challenges such belief moving from a purely physical…
In this communication, some economic models given by functional mappings are addressed. These are models for random markets where agents trade by pairs and exchange their money in a random and conservative way. They display the exponential…
Most of the econometric and econophysics models have been borrowed from the statistical physics, and as a cosequence, a new interdisciplinary science called econophysics has emerged. In this paper we planned to extend the analogy between…
We take inspiration from statistical physics to develop a novel conceptual framework for the analysis of financial markets. We model the order book dynamics as a motion of particles and define the momentum measure of the system as a way to…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
A representation of economic activity in the form of a law of conservation of value is presented based on the definition of value as potential to act in an environment. This allows the encapsulation of the term as a conserved quantity…
This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical…
In the current era of worldwide stock market interdependencies, the global financial village has become increasingly vulnerable to systemic collapse. The recent global financial crisis has highlighted the necessity of understanding and…
Suppose you look at today's stock prices and bet on the value of the first digit. One could guess that a fair bet should correspond to the frequency of $1/9 = 11.11%$ for each digit from 1 to 9. This is by no means the case, and one can…
The Bohmian quantum approach is implemented to analyze the financial markets. In this approach, there is a wave function that leads to a quantum potential. This potential can explain the relevance and entanglements of the agent's behaviors…