EconoPhysics Papers
http://www3.unifr.ch/econophysics/?q=news
enPlanimetry of economic states
http://www3.unifr.ch/econophysics/?q=content/planimetry-economic-states
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The new information physical method of constructing the space of economic states is proposed. Unlike the existing theories of consumption, its properties are completely determined axiomatically by the operation of measurement and do not require phenomenological assumptions. We consider a transaction of exchange of valuables between two proprietors as such operation. The result of measurement is a dimensional number equal to the proportion of exchange. The constructed space appears to be Euclidean vector space with ordinary operators of composition of vectors, their scalar product, etc. The task of determining the parameters of equilibrium of a complex economic system can be formulated as a task of statics in the constructed space and can be solved by one of the physical methods.</p>
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</div>Wed, 22 Mar 2017 15:40:20 +0000Melnyk27844 at http://www3.unifr.ch/econophysicsThe possibility of constructing a relativistic space of information states based on the theory of complexity and analogies with physical space-time
http://www3.unifr.ch/econophysics/?q=content/possibility-constructing-relativistic-space-information-states-based-theory-complexity-and
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The possibility of calculation of the conditional and unconditional complexity of description of information objects in the algorithmic theory of information is connected with the limitations for the set of the used languages of programming (description). The results of calculation of the conditional complexity allow introducing the fundamental information dimensions and the partial ordering in the set of information objects, and the requirement of equality of languages allows introducing the vector space. In case of optimum compression, the “prefix” contains the regular part of the information about the object, and is analogous to the classical trajectory of a material point in the physical space, and the “suffix” contains the random part of the information, the quantity of which is analogous to the physical time in the intrinsic reference system. Analysis of the mechanism of the “Einstein’s clock” allows representing the result of observation of the material point as a word, written down in a binary alphabet, thus making the aforesaid analogies more clear. The kinematics of the information trajectories is described by the Lorentz’s transformations, identically to its physical analog. At the same time, various languages of description are associated with various reference systems in physics. In the present paper, the information analog of the principle of least action is found and the main problems of information dynamics in the constructed space are formulated.</p>
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</div>Wed, 22 Mar 2017 01:31:26 +0000Melnyk27843 at http://www3.unifr.ch/econophysicsPredicting Stock Market Prices with Physical Laws
http://www3.unifr.ch/econophysics/?q=content/predicting-stock-market-prices-physical-laws
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>This paper argues that one can calculate the probability of an asset's price displacement in a specific direction assuming the asset complies with the physical principle of least action. It first suggests that the price displacement of a financial asset is essentially dampened harmonic motion and then applies physical principles such as the Lagrangian and stationary action to analyze this motion. From this analysis, the paper constructs a method to predict the probability of an asset's price displacement in both magnitude and direction. Initial tests show that the method produces accurate probability predictions.</p>
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</div>Sun, 12 Feb 2017 21:36:54 +0000manhire27821 at http://www3.unifr.ch/econophysicsTowards Exact Nonextensive Solutions Of The American Style Options II
http://www3.unifr.ch/econophysics/?q=content/towards-exact-nonextensive-solutions-american-style-options-ii
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Progress towards an exact solution(s) of the American style call or put option on the same footing as the European (Vanilla) call or put option has been reported by us recently, this under certain random (exercise) boundary assumptions . In this letter we present several (more) approaches towards deriving such exact solutions, functions that are obtained from & which are based on applying boundary conditions that are here additionally random in time. We derive under certain sets of limiting assumptions several closed form extensive & nonextensive statistics solution(s).</p>
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</div>Wed, 08 Feb 2017 20:25:10 +0000fredrickmichael27819 at http://www3.unifr.ch/econophysicsInvestigating market efficiency through a forecasting model based on differential equations
http://www3.unifr.ch/econophysics/?q=content/investigating-market-efficiency-through-forecasting-model-based-differential-equations
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><a class="S_C_ddDoi" href="http://dx.doi.org/10.1016/j.physa.2017.01.057" id="ddDoi" target="doilink">http://dx.doi.org/10.1016/j.physa.2017.01.057</a></p>
<p>A new differential equation based model for stock price trend forecast is proposed as a tool to investigate efficiency in an emerging market. Its predictive power showed statistically to be higher than the one of a completely random model, signaling towards the presence of arbitrage opportunities. Conditions for accuracy to be enhanced are investigated, and application of the model as part of a trading strategy is discussed.</p>
<p> </p>
<p><a class="S_C_ddDoi" href="http://dx.doi.org/10.1016/j.physa.2017.01.057" id="ddDoi" target="doilink">http://dx.doi.org/10.1016/j.physa.2017.01.057</a></p>
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</div>Wed, 01 Feb 2017 12:05:52 +0000charlenecassia27812 at http://www3.unifr.ch/econophysicsCoevolving complex networks in the model of social interactions
http://www3.unifr.ch/econophysics/?q=content/coevolving-complex-networks-model-social-interactions
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We analyze Axelrod’s model of social interactions on coevolving complex networks. We introduce four extensions with different mechanisms of edge rewiring. The models are intended to catch two kinds of interactions — preferential attachment, which can be observed in scientists or actors collaborations, and local rewiring, which can be observed in friendship formation in everyday relations. Numerical simulations show that proposed dynamics can lead to the power-law distribution of nodes’ degree and high value of the clustering coefficient, while still retaining the small-world effect in three models. All models are characterized by two phase transitions of a different nature. In case of local rewiring we obtain order–disorder discontinuous phase transition even in the thermodynamic limit, while in case of long-distance switching discontinuity disappears in the thermodynamic limit, leaving one continuous phase transition. In addition, we discover a new and universal characteristic of the second transition point — an abrupt increase of the clustering coefficient, due to formation of many small complete subgraphs inside the network.</p>
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</div>Wed, 25 Jan 2017 09:08:44 +0000traducha27807 at http://www3.unifr.ch/econophysicsA Gibbsian Approach to Potential Game Theory
http://www3.unifr.ch/econophysics/?q=content/gibbsian-approach-potential-game-theory
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In games for which there exists a potential, the deviation-from-rationality dynamical model for which each agent's strategy adjustment follows the gradient of the potential along with a normally distributed random perturbation, is shown to equilibrate to a Gibbs measure for a finite number of agents. The extension to an infinite number of agents is done by taking infinite-agent limit of the Gibbs measures for a finite number of agents. Upon taking the infinite-agent limit, more than one infinite-agent equilibrium measure may occur, which is the analogy of a phase transition in statistical mechanics. The control of globally acting parameters determine which equilibrium state is obtained, just as a global magnetic field can determine the low-temperature phase of a physical spin system. This is exactly the spirit of so-called `Post Walrasian' economics: bounded rationality is implemented, multiple equilibria are acceptable, and institutions (i.e., globally acting non-cost parameters) can be used to determine equilibrium.</p>
<p>The standard Cournot model of an oligopoly is shown not to have a phase transition, as it is equivalent to a continuum version of the Curie-Weiss model. However, when there is increased local competition among agents, a phase transition will likely occur. In the case of a simple discrete model (stripped-down `minority game'),</p>
<p>if the oligopolistic competition has power-law falloff and there is increased local competition among agents, then the model has a rich phase diagram with an antiferromagnetic checkerboard state, striped states and maze-like states with varying widths, and finally a paramagnetic state. Such phases have economic implications as to how agents compete given various restrictions on how goods are distributed. The standard Cournot model corresponds to a uniform distribution of goods, whereas the power-law variations correspond to goods for which the distribution is more localized.</p>
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</div>Thu, 19 Jan 2017 00:41:45 +0000mjcampbell27806 at http://www3.unifr.ch/econophysicsThe Optimal Can: An Uncanny Approach
http://www3.unifr.ch/econophysics/?q=content/optimal-can-uncanny-approach
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We examine a novel variation of the classic cylindrical can optimization problem encountered in almost every first-semester calculus class. The standard problem is to minimize the cost of material used to make the can, which amounts to minimizing the surface area given a fixed volume, yielding a height equal to the diameter of the top circle (square front profile). Our approach is to add a new distribution/storage cost to the material cost to get our total production cost. These distribution and storage cost terms are sourced from an actual carrier company that distributes cans, and as such the simulation is faithful to real-life shipping and storage costs.</p>
<p>We show two things numerically. Firstly, for low distribution/storage costs, the material cost dominates and the can has the classic square profile. Secondly, for distribution/storage costs above a critical value, the symmetry of the square is broken and the can takes on a rectangular profile resulting from the rectangular geometry of the distribution truck or shelf/cabinet area for storage. Interestingly, the can dimensions remain constant above and below the critical ship/store cost, exactly as with a Landau ``mean-field'' phase transition in statistical mechanics. The parameter for the distribution/storage cost appears exactly as an inverse-temperature in magnetic systems, and this Landau-type transition has the same basic phenomenology as a Landau approximation to a magnetic system which is non-magnetic above a critical temperature (paramagnetic) but magnetizes below a critical temperature (ferromagnetic), much like a Curie temperature for a discontinuous phase transition.</p>
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</div>Thu, 19 Jan 2017 00:36:52 +0000mjcampbell27805 at http://www3.unifr.ch/econophysicsInevitability of Collusion in a Coopetitive Bounded Rational Cournot Model with Increasing Demand
http://www3.unifr.ch/econophysics/?q=content/inevitability-collusion-coopetitive-bounded-rational-cournot-model-increasing-demand
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>A coopetitive model, using the structure formulated by D. Carfi, is constructed for a bounded rational Cournot model with increasing demand (as with Veblen goods) and <em>any</em> number of agents. This model has a cooperative strategy parameter that interpolates between perfect competition and collusion. For this model, H. Dixon's result of the ``inevitability of collusion'' is demonstrated using a cluster expansion idea from percolation models in statistical mechanics to prove positivity of correlation functions. Specifically, it is shown that every agent's expected payoff increases as the cooperatively chosen interpolation parameter approaches the value that gives collusion. Therefore agents will cooperatively agree to collude. When the behavior is perfectly rational (zero temperature), collusion does not result in an increase in payoffs since agents produce at maximum output in competition or collusion: agents gain no benefit for putting in the extra effort to collude. So we see that neoclassical analysis (i.e., Nash equilibrium analysis) can not explain collusion in this case. However when we consider the full bounded rational model (positive temperatures), we recover Dixon's result to see that agents will cooperatively decide to collude to maximize payoffs. We point out that the neoclassical model is the zero-temperature limit of the general bounded rational model utilized here in accordance with the Bohr correspondence principle.</p>
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</div>Thu, 19 Jan 2017 00:30:36 +0000mjcampbell27804 at http://www3.unifr.ch/econophysicsBounded Rational Speculative and Hedging Interaction Model in Oil and U.S. Dollar Markets
http://www3.unifr.ch/econophysics/?q=content/bounded-rational-speculative-and-hedging-interaction-model-oil-and-us-dollar-markets
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>A `bounded rational' overlay is constructed for a model of an interaction between two players who speculate on oil and the U.S. dollar, subject to financial transaction taxes. This model also has two types of operators: a real economic subject (Air) and an investment bank (Bank).</p>
<p>Many investment operators (banks) are also considered. Their behavior equilibrates much more quickly, as they react to the move of Air. In this sense, Air is an acting external agent (such as with an external magetic field in a magnetic system), whereas the random component of the bounded rational behavior of banks is `annealed' (i.e., averaged out before Air makes its next transaction).</p>
<p>Under certain conditions for the model, the equilibrium measure for the bank agents after Air has played its strategy, is a Gibbs measure from statistical mechanics. The Gibbs measure arises since the interactions between operators are that for a bounded-rational Potential game.</p>
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</div>Thu, 19 Jan 2017 00:24:45 +0000mjcampbell27803 at http://www3.unifr.ch/econophysicsSpeculative and Hedging Interaction Model in Oil and U.S. Dollar Markets II - Nash Equilibrium for One or More Banks
http://www3.unifr.ch/econophysics/?q=content/speculative-and-hedging-interaction-model-oil-and-us-dollar-markets-ii-nash-equilibrium-one
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We determine the (refined) Nash equilibrium(s) for a bounded rational Carfi-Mussolino speculative and hedging model. This model has two types of operators: a real economic subject (Air) and one or more investment banks (Bank).</p>
<p>We consider the bank agents' behavior to equilibrate much more quickly than that of Air, as they react to the move of Air. In this sense, Air is an acting external agent, whereas the action of the banks is `annealed' -- i.e., equilibrates before Air makes its next transaction. When Air makes no purchases of oil futures as a hedge, two Nash equilibriums exist for the bank agents. However, a unique Nash equilibrium exists for the bank agents when Air makes a purchase. This is a result of Air's purchase breaking a symmetry of the potential. The existence of multiple equilibriums in this two-market model is in the spirit of the Sonnenschein-Mantel-Debreu theorem, and is associated with phase transitions in statistical mechanics.</p>
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</div>Thu, 19 Jan 2017 00:19:25 +0000mjcampbell27802 at http://www3.unifr.ch/econophysicsSpeculative and Hedging Interaction Model in Oil and U.S. Dollar Markets III - Phase Transition
http://www3.unifr.ch/econophysics/?q=content/speculative-and-hedging-interaction-model-oil-and-us-dollar-markets-iii-phase-transition
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We show that there is a phase transition in the bounded rational Carfi-Mussolino speculative and hedging model. This model has two types of operators: a real economic subject (Air) and one or more investment banks (Bank). It also has two markets: oil spot market and US dollar futures. We consider the Bank agents' behavior to equilibrate much more quickly than that of Air, as they react to the move of Air in the typical manner that speculators equilibrate markets. In this sense, Air is an acting external agent due to its longer-term investing, whereas the action of the banks is `annealed' -- i.e., equilibrates before Air makes its next transaction.</p>
<p>This model constitutes a potential game with a non-convex potential, and in the spirit of the Sonnenschein-Mantel-Debreu theorem, there are two equilibriums at lower temperatures due to a market-exchange symmetry in the potential. When the longer-term investing Air remains in the oil futures market (nonzero field), the speculating Bank agents prefer the oil spot market and their behavior is more stable, as is reflected by finite spatial volatility. Bank agents also prefer the oil spot market immediately after a relatively slow divestment of Air from the oil futures market. When Air makes no purchases of oil futures as a hedge (zero field), then as Bank agents become more rational (thermal cooling), they will ``crowd'' or ``herd'' their preferences into one market or the other at a critical temperature, which is spontaneous symmetry breaking of the market exchange symmetry. Thus we see that spontaneous symmetry breaking refines the potential and signifies the emergence of a market preference among speculators. The spatial volatility diverges at this critical temperature, indicating a less stable situation when longer-term investing is absent.</p>
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</div>Thu, 19 Jan 2017 00:14:26 +0000mjcampbell27801 at http://www3.unifr.ch/econophysicsBurst and inter-burst duration statistics as empirical test of long-range memory in the financial markets
http://www3.unifr.ch/econophysics/?q=content/burst-and-inter-burst-duration-statistics-empirical-test-long-range-memory-financial-markets
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><!--StartFragment--></p><p>We address the problem of long-range memory in the financial markets. There are two conceptually different ways to reproduce power-law decay of auto-correlation function: using fractional Brownian motion as well as non-linear stochastic differential equations. In this contribution we address this problem by analyzing empirical return and trading activity time series from the Forex. From the empirical time series we obtain probability density functions of burst and inter-burst duration. Our analysis reveals that the power-law exponents of the obtained probability density functions are close to 3/2, which is a characteristic feature of the one-dimensional stochastic processes. This is in a good agreement with earlier proposed model of absolute return based on the non-linear stochastic differential equations derived from the agent-based herding model.</p>
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</div>Fri, 06 Jan 2017 16:31:54 +0000Gontis27789 at http://www3.unifr.ch/econophysicsBitcoin Market Volatility Analysis Using
http://www3.unifr.ch/econophysics/?q=content/bitcoin-market-volatility-analysis-using
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In this paper we propose to use the Grand Canonical Minority Game (GCMG, a highly simplified financial market model) as a model of bitcoin market to show how the lack of an income for “miners”, similar to yield earned by bond holders, could be a structural reason for high volatility of bitcoin price in a reference currency. Coherently with present analysis, the introduction of future contracts on bitcoin would have the effect of reducing the overall market volatility.</p>
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</div>Thu, 22 Dec 2016 16:45:48 +0000matteoortisi27786 at http://www3.unifr.ch/econophysicsSOLUTION OF PROBLEMS OF DYNAMICS IN THE INFORMATION SPACE OF STATES ON THE BASIS OF THE PRINCIPLE OF COMPLEXITY MINIMIZATION
http://www3.unifr.ch/econophysics/?q=content/solution-problems-dynamics-information-space-states-basis-principle-complexity-minimization
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><em>The principle of minimizing of the complexity allows us to introduce a quantitative measure of information in algorithmic information theory. It is similar to the physical principle of least action in the vector space of the information states. The variational problem of finding the optimal description of the information object "B" for a given object "A" corresponds to the determination of the classical trajectory of a material point for a given initial and final position in the physical space-time. At the same time, the physical in the own reference system is equivalent to the length of the suffix of the compressed binary word. The proposed analogies of the information and physical theories simplify the description of the complex systems of information objects.</em></p>
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</div>Mon, 19 Dec 2016 19:00:26 +0000Melnyk27785 at http://www3.unifr.ch/econophysicsTHE POSSIBILITY OF CONSTRUCTING OF THE INFORMATION QUANTUM-RELATIVISTIC SPACE OF STATES
http://www3.unifr.ch/econophysics/?q=content/possibility-constructing-information-quantum-relativistic-space-states
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><em>Algorithmic theory of "complexity" is the most common approach to the description of the measurement results and their analysis. It has been shown that it allows us to introduce a partial ordering on the set of results of basic measurement in physics, information theory and economics. However, the properties of languages, which is calculated using the "complexity" is not symmetrical. The requirement to lack a dedicated description language allows us to represent data objects as elements of a relativistic vector space. The "transfer rules” from one language to another of the description of the program correspond to the coordinate transformations from one reference system to another in the physical space-time. Many events in this information space is not given a priori, and is formed as a representation of the results of fundamental measurement. This allows us to consider the problem of information theory similar to the objectives of the physical dynamics.</em></p>
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</div>Mon, 19 Dec 2016 18:57:06 +0000Melnyk27784 at http://www3.unifr.ch/econophysicsTowards Exact Solutions Of The American Style Options
http://www3.unifr.ch/econophysics/?q=content/towards-exact-solutions-american-style-options
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Exact Solutions of the American style call or put option on the same footing as the European (Vanilla) call or put option have not been derived. That is a function that describes the call option say as depending on the underlying & portfolio hedge & portfolio time dependent riskless asset increase in value & yet inclusive of the uncertainty due to early exercise. In this letter we present several approaches towards deriving such a function that are conceptually inspired by and are based on current methods of discrete probabilistic decision trees and their diffusion approximation, & from methods of applying boundary conditions that are here additionally random in time. We derive under a certain set of limiting assumptions i.e. the random in time boundary conditions & their statistics (utilizing for illustration the simplest) and furthermore for flux allowing VN boundaries & flux absorbing Dirichlet boundaries a closed form solution.</p>
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</div>Fri, 09 Dec 2016 03:03:36 +0000fredrickmichael27771 at http://www3.unifr.ch/econophysics
A stylized model for wealth distribution
http://www3.unifr.ch/econophysics/?q=content/stylized-model-wealth-distribution-0
<div class="field field-name-field-serial-no field-type-arxiv field-label-hidden"><div class="field-items"><div class="field-item even"><div class="arxiv"><p> The recent book by T. Piketty (Capital in the Twenty-First Century) promoted
the important issue of wealth inequality. In the last twenty years, physicists
and mathematicians developed models to derive the wealth distribution using
discrete and continuous stochastic processes (random exchange models) as well
as related Boltzmann-type kinetic equations. In this literature, the usual
concept of equilibrium in Economics is either replaced or completed by
statistical equilibrium.
<br />In order to illustrate this activity with a concrete example, we present a
stylised random exchange model for the distribution of wealth. We first discuss
a fully discrete version (a Markov chain with finite state space). We then
study its discrete-time continuous-state-space version and we prove the
existence of the equilibrium distribution. Finally, we discuss the connection
of these models with Boltzmann-like kinetic equations for the marginal
distribution of wealth. This paper shows in practice how it is possible to
start from a finitary description and connect it to continuous models following
Boltzmann's original research program.
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</div>Wed, 19 Oct 2016 09:35:33 +0000ruixiao27740 at http://www3.unifr.ch/econophysicsFractal approach towards power-law coherency to measure cross-correlations between time series
http://www3.unifr.ch/econophysics/?q=content/fractal-approach-towards-power-law-coherency-measure-cross-correlations-between-time-series
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We focus on power-law coherency as an alternative approach towards studying power-law cross-correlations between simultaneously recorded time series. To be able to study empirical data, we introduce three estimators of the power-law coherency parameter $H_{\rho}$ based on popular techniques usually utilized for studying power-law cross-correlations -- detrended cross-correlation analysis (DCCA), detrending moving-average cross-correlation analysis (DMCA) and height cross-correlation analysis (HXA). In the finite sample properties study, we focus on the bias, variance and mean squared error of the estimators. We find that the DMCA-based method is the safest choice among the three. The HXA method is reasonable for long time series with at least $10^4$ observations, which can be easily attainable in some disciplines but problematic in others. The DCCA-based method does not provide favorable properties which even deteriorate with an increasing time series length. The paper opens a new venue towards studying cross-correlations between time series.</p>
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</div>Thu, 01 Sep 2016 13:30:45 +0000LKristoufek27715 at http://www3.unifr.ch/econophysicsMODERNIZED OF ALGORITHM OF INNOVATIVE – MARKET ECONOMY MODEL
http://www3.unifr.ch/econophysics/?q=content/modernized-algorithm-innovative-%E2%80%93-market-economy-model
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Abstract. Authorial algorithm of innovative - market economy model modernized by MathCAD software for the division of stochastic variables and account of<br />
volatility of open market and conjuncture price-waves. This algorithm educed the stages of free market development with the different degree of risk for capital investments. Phases are found out becoming and monopolizations of market. Phases are determined by the state of affairs of prices and degree of market monopolism.<br />
Keywords: innovative - market economy model, free market, algorithm, software, barter, volatility.</p>
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</div>Thu, 11 Aug 2016 12:54:54 +0000forusa27700 at http://www3.unifr.ch/econophysicsOBJECTIVE FUNCTION OF TRANSFORMATION OF SOCIETY
http://www3.unifr.ch/econophysics/?q=content/objective-function-transformation-society
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Abstract<br />
A method and algorithm of modernizations of the state are created by innovative - market model and strategic function.<br />
<br />
Ключевые слова: индекс восприятия коррупции, рейтинг свободы прессы, Е – индекс, функция цели, стратегическая функция, остенсивные дефиниции.<br />
Keywords: corruption perception index, rating of press freedom, EGDI, objective function, strategic function, ostensive definitions.</p>
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</div>Thu, 11 Aug 2016 12:47:16 +0000forusa27699 at http://www3.unifr.ch/econophysicsFORMALIZATION OF SEMANTIC INFORMATION
http://www3.unifr.ch/econophysics/?q=content/formalization-semantic-information
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Abstract<br />
Semantic information is analyzed by the tensors of mass data of fundamental definitions. New knowledge is extracted from mass data by these tensors and analytical and synthetic procedures. This method allows verifying of mass data.</p>
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</div>Thu, 11 Aug 2016 12:36:42 +0000forusa27698 at http://www3.unifr.ch/econophysicsCowboying Stock Market Herds with Robot Traders
http://www3.unifr.ch/econophysics/?q=content/cowboying-stock-market-herds-robot-traders
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><div>
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<p>One explanation for large stock market fluctuations is its tendency to herd behavior. We put forward an agent-based model where instabilities are the result of liquidity imbalances amplified by local interactions through imitation, and calibrate the model to match some key statistics of actual daily returns. We show that an “aggregate market-maker” type of liquidity injection is not successful in stabilizing prices due to the complex nature of the stock market. To offset liquidity shortages, we propose the use of locally triggered contrarian rules, and show that these mechanisms are effective in preventing extreme returns in our artificial stock market.</p>
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</div>Thu, 28 Jul 2016 14:45:25 +0000npsuhadolnik27688 at http://www3.unifr.ch/econophysicsMathematical model of innovative economy
http://www3.unifr.ch/econophysics/?q=content/mathematical-model-innovative-economy
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Dubovikov N.<br />
Mathematical model of innovative economy<br />
The mathematical model of barter of free commodity producers is developed on the basis of mathe-<br />
matical model of open market, the neoclassical model of economic growth of Robert Solow, the influence<br />
technological progress on J. Tinbergen and the model of functional dependence of index technological pro-<br />
gress when technological progress is the exogenous factor of economic growth and<br />
reflects the law of accumulation of information in the economic system. The algorithm and program are de-<br />
veloped for this mathematical model of innovative economy of barter of free commodity producers by<br />
means of software MathCAD. <br />
Keywords: іndex technological progress, multifactor productivity, coefficient of adaptation of<br />
information, coefficient of application of information, law of accumulation of information, innovative econ-<br />
omy.</p>
<p>PS. An author has the article in English</p>
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</div>Sat, 02 Jul 2016 19:41:30 +0000forusa27676 at http://www3.unifr.ch/econophysicsDifferentiation of Commodity Producers in Conditions of Uneconomic Preferences
http://www3.unifr.ch/econophysics/?q=content/differentiation-commodity-producers-conditions-uneconomic-preferences
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Dubovikov N. M. Differentiation of Commodity<br />
Producers in Conditions of Uneconomic Preferences<br />
The mathematical model of barter of free commodity<br />
producers is developed on the basis of vehicle of casual<br />
functions and game theory, adequately describing the<br />
real open market and allowing forecasting the dynamics<br />
of its changes, coming from its primary descriptions.<br />
Model adequacy is confirmed by the world statistical<br />
information.<br />
Key words: mathematical model, the free market,<br />
algorithm, barter, conditions of uneconomic preferences</p>
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</div>Fri, 01 Jul 2016 10:19:34 +0000forusa27675 at http://www3.unifr.ch/econophysicsMathematical evaluating of type of function of the multifactor productivity
http://www3.unifr.ch/econophysics/?q=content/mathematical-evaluating-type-function-multifactor-productivity
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Mathematical evaluating of type of function of the multifactor productivity<br />
The type of function of index technological progress in multifactor productivity of the economy growth in<br />
the neoclassical model of Robert Solow was determined. Technological progress is the exogenous factor of the<br />
economic growth and reflects the law of accumulation of information in the economic system. Technological<br />
progress small depends on the size of capital and size of labor expenses. Index technological progress there is a<br />
casual function that depends on the function of accumulation of information in the economic system.<br />
Keywords: іndex technological progress, multifactor productivity, coefficient of adaptation of informati-<br />
n, coefficient of application of information, law of accumulation of information.</p>
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</div>Fri, 24 Jun 2016 11:16:46 +0000forusa27674 at http://www3.unifr.ch/econophysicsMathematical Model of Modern Economy
http://www3.unifr.ch/econophysics/?q=content/mathematical-model-modern-economy
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>There is conducted an analysis of statistical results of economic activity of the largest companies of the world in 2013 based on the data of the Forbes magazine. The innovative market model (ІММ) of open market is applied for this analysis. This IMM was developed before. The innovative market model (ІММ) of open market is confirmed by statistical material of the world economy. This model allows forecasting and affecting objective factors, influencing profitability and prospects of growth of efficiency of the company, and is applied for increase of its capitalisation.</p>
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</div>Tue, 21 Jun 2016 21:28:23 +0000forusa27666 at http://www3.unifr.ch/econophysicsAn Alternative Postulate Set for Geometry
http://www3.unifr.ch/econophysics/?q=content/alternative-postulate-set-geometry
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The purpose of this paper is to introduce a new set of postulates for geometry and to define the minimum of abstract algebra axioms needed. Emphasis is put on accepting as intuitive only those spatial relations that small children understand without explanation; their parents are just assigning names to concepts that are instinctive in humans. Geometers are invited to compare these assumptions with the foundations that are used in other textbooks. These postulates and axioms are to be the foundations of a textbook, Geometry–Do.</p>
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</div>Wed, 15 Jun 2016 16:46:44 +0000Grozny27664 at http://www3.unifr.ch/econophysicsАльтернативный набор постулатов геометрии
http://www3.unifr.ch/econophysics/?q=content/%D0%B0%D0%BB%D1%8C%D1%82%D0%B5%D1%80%D0%BD%D0%B0%D1%82%D0%B8%D0%B2%D0%BD%D1%8B%D0%B9-%D0%BD%D0%B0%D0%B1%D0%BE%D1%80-%D0%BF%D0%BE%D1%81%D1%82%D1%83%D0%BB%D0%B0%D1%82%D0%BE%D0%B2-%D0%B3%D0%B5%D0%BE%D0%BC%D0%B5%D1%82%D1%80%D0%B8%D0%B8
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Данная работа имеет целью предложить новый набор постулатов геометрии и определить необходимый минимум аксиом общей алгебры. Основной упор делается на то, чтобы принимать в качестве интуитивных только такие пространственные соотношения, которые без объяснений понятны маленьким детям; их родители всего лишь дают названия идеям, которые человек воспринимает на инстинктивном уровне. Предлагаем геометрам сравнить эти допущения с основаниями, которые используются в других учебниках. Данные постулаты и аксиомы лягут в основу учебника «Геометрия-до».<a name="_GoBack" id="_GoBack"></a></p>
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</div>Wed, 15 Jun 2016 16:44:44 +0000Grozny27663 at http://www3.unifr.ch/econophysicsDynamic Option Pricing with Endogenous Stochastic Arbitrage
http://www3.unifr.ch/econophysics/?q=content/dynamic-option-pricing-endogenous-stochastic-arbitrage
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Only few efforts have been made in order to relax one of the key assumptions of the Black-Scholes model: the no-arbitrage assumption. This despite the fact that arbitrage processes usually exist in the real world, even thought they tend to be short-lived. The purpose of this paper is to develop an option pricing model with endogenous stochastic arbitrage, capable of modelling in a general fashion any future and underlying asset that deviate itself from its market equilibrium. Thus, this investigation calibrates empirically the arbitrage on the futures on the S&P 500 index using transaction data from September 1997 to June 2009, from here a specic type of arbitrage called arbitrage bubble, based on a t-step function, is identied and hence used in our model. The theoretical results obtained for Binary and European call options, for this kind of arbitrage, show that an investment strategy that take advantage of the identied arbitrage possibility can be dened, whenever it is possible to anticipate in relative terms the amplitude and timespan of the process. Finally, the new trajectory of the stock price is analytically estimated for a specific case of arbitrage and some numerical illustrations are developed. We find that the consequences of a finite and small endogenous arbitrage, not only change the trajectory of the asset price during the period when it started, but also after the arbitrage bubble is already gone. In this context, our model will allow us to calibrate the B-S model to that new trajectory even when the arbitrage already started.</p>
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</div>Mon, 16 May 2016 00:21:09 +0000mauriccio196527633 at http://www3.unifr.ch/econophysicsA quantum model of option pricing: When Black–Scholes meets Schrödinger and its semi-classical limit
http://www3.unifr.ch/econophysics/?q=content/quantum-model-option-pricing-when-black%E2%80%93scholes-meets-schr%C3%B6dinger-and-its-semi-classical-0
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The Black–Scholes equation can be interpreted from the point of view of quantum mechanics, as the imaginary time Schrödinger equation of a free particle.When deviations of this state of equilibrium are considered, as a product of some market imperfection, such as: Transaction cost, asymmetric information issues, short-term volatility, extreme discontinuities, or serial correlations; the classical non-arbitrage assumption of the Black–Scholesmodel is violated, implying a non-risk-free portfolio. From Haven (2002) [1] we know that an arbitrage environment is a necessary condition to embedding the Black–Scholes option pricing model in a more general quantum physics setting. The aim of this paper is to propose a new Black–Scholes–Schrödinger model based on the endogenous arbitrage option pricing formulation introduced by Contreras et al. (2010) [2]. Hence, we derive a more general quantum model of option pricing, that incorporates arbitrage as an external time dependent force, which has an associated potential related to the random dynamic of the underlying asset price. This new resultant model can be interpreted as a Schrödinger equation in imaginary time for a particle of mass 1/σ<sup>2</sup> with a wave function in an external field force generated by the arbitrage potential. As pointed out above, this new model can be seen as a more general formulation, where the perfect market equilibrium state postulated by the Black–Scholes model represent a particular case. Finally, since the Schrödinger equation is in place, we can apply semiclassical methods, of common use in theoretical physics, to find an approximate analytical solution of the Black–Scholes equation in the presence of market imperfections, as it is the case of an arbitrage bubble. Here, as a numerical illustration of the potential of this Schrödinger equation analogy, the semiclassical approximation is performed for different arbitrage bubble forms (step, linear and parabolic) and compare with the exact solution of our general quantum model of option pricing.</p>
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</div>Sun, 15 May 2016 22:28:08 +0000mauriccio196527632 at http://www3.unifr.ch/econophysicsStochastic volatility models, singular dynamics and constrained path integrals
http://www3.unifr.ch/econophysics/?q=content/stochastic-volatility-models-singular-dynamics-and-constrained-path-integrals
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Stochastic volatility models have been widely studied and used in the nancial world. Heston model [1] is one of the best known models to deal with this issue. These stochastic volatility models are characterized by the fact that they explicitly depend on a correlation parameter which relates the two Brownian motions that drive the stochastic dynamics associated to the volatility and the underlying asset. Solutions to the Heston model, using a path integral approach, are found in [15] while in [16], [17] propagators for dierent stochastic volatility models are constructed. In all previous cases, the propagator is not dened for extreme cases rho = +/- 1. It is therefore necessary to obtain a solution for these extreme cases and also to understand the origin of the divergence of the propagator. In this paper we study in detail the stochastic volatility models for extreme values rho = +/- 1 and show that in these two cases, the associated classical dynamics corresponds to a system with second class constraints, which must be dealt with using Dirac's method for constrained systems [18], [19] in order to properly obtain the propagator in the form of a Euclidean Hamiltonian path integral [21]. After integrating over momenta, one gets a Euclidean Lagrangian path integral without constraints, which in the case of the Heston model corresponds to a path integral of a repulsive radial harmonic oscillator. In this case, the price of the underlying asset is completely determined by one of the second class constraints in terms of volatility and plays no active role in the path integral.</p>
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</div>Sun, 15 May 2016 21:58:10 +0000mauriccio196527631 at http://www3.unifr.ch/econophysicsAccelerating Network Statistical Dynamics
http://www3.unifr.ch/econophysics/?q=content/accelerating-network-statistical-dynamics
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Recently there has been great interest in studying the complexity of networks in ever more complex detail that includes acceleration, a varying and possibly random strengths of links, the network topology and its hidden metrics. In short the complexification of network research and its application to ever more detailed physical dynamics has brought networks to the athematics of statistical dynamics of interacting systems, of which the simpler models as these newly studied complex networks are special cases of, and which all can be described by a general field theory. Eschewing the full field theory however we present the intermediate theory a statistical dynamics of accelerating networks and of varying links weights, the current state of the art.</p>
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</div>Fri, 13 May 2016 19:22:53 +0000fredrickmichael27630 at http://www3.unifr.ch/econophysicsEpidemiology Interacting Many-Body Models
http://www3.unifr.ch/econophysics/?q=content/epidemiology-interacting-many-body-models
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Epidemics occur due to many complex reasons. When physical harm and or damage is brought upon humans by an outside biological agency, such epidemics can usually be traced to a harmful organism directly re- sponsible such as an environment borne virus or an organism transmitted by a host that may or may not be itself harmed by the pathogen . We seek in this letter to derive theoretical models robust to the point of inclusion of any observable deemed relevant from psychological to social demographical to spatial and temporal to discrete and or continuous in interactions to describe statistically and dynamically interactions that lead to or are characteristic of an epidemic, deriving models of interacting many-body systems that are spatial and temporal and that are detailed models of the statistics of the species species interactionsthat are inherent to an epi- demic and furthermore to characterize the outbreak of an epidemic as a resulting critical state of interacting many-body systems that includes the spatial and temporal details sought for.</p>
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</div>Fri, 13 May 2016 19:17:27 +0000fredrickmichael27629 at http://www3.unifr.ch/econophysicsStochastic volatility models at ρ = ±1 as second class constrained Hamiltonian systems
http://www3.unifr.ch/econophysics/?q=content/stochastic-volatility-models-%CF%81-%C2%B11-second-class-constrained-hamiltonian-systems
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The stochastic volatility models used in the financial world are characterized, in the continuous-time case, by a set of two coupled stochastic differential equations for the underlying asset price S and volatility σ. In addition, the correlations of the two Brownian movements that drive the stochastic dynamics are measured by the correlation parameter ρ (−1 ≤ ρ ≤ 1). This stochastic system is equivalent to the Fokker–Planck equation for the transition probability density of the random variables S and σ. Solutions for the transition probability density of the Heston stochastic volatility model (Heston, 1993) were explored in Dragulescu and Yakovenko (2002), where the fundamental quantities such as the transition density itself, depend on ρ in such a manner that these are divergent for the extreme limit ρ = ±1. The same divergent behavior appears in Hagan et al. (2002), where the probability density of the SABR model was analyzed. In an option pricing context, the propagator of the bi-dimensional Black–Scholes equation was obtained in Lemmens et al. (2008) in terms of the path integrals, and in this case, the propagator diverges again for the extreme values ρ = ±1. This paper shows that these similar divergent behaviors are due to a universal property of the stochastic volatility models in the continuum: all of them are second class constrained systems for the most extreme correlated limit ρ = ±1. In this way, the stochastic dynamics of the ρ = ±1 cases are different of the −1 < ρ < 1 case, and it cannot be obtained as a continuous limit from the ρ ̸= ±1 regimen. This conclusion is achieved by considering the Fokker–Planck equation or the bi-dimensional Black–Scholes equation as a Euclidean quantum Schrödinger equation. Then, the analysis of the underlying classical mechanics of the quantum model, implies that stochastic volatility models at ρ = ±1 correspond to a constrained system. To study the dynamics in an appropriate form, Dirac’s method for constrained systems (Dirac, 1958, 1967) must be employed, and Dirac’s analysis reveals that the constraints are second class. In order to obtain the transition probability density or the option price correctly, one must evaluate the propagator as a constrained Hamiltonian path-integral (Henneaux and Teitelboim, 1992), in a similar way to the high energy gauge theory models. In fact, for all stochastic volatility models, after integrating over momentum variables, one obtains an effective Euclidean Lagrangian path-integral over the volatility alone. The role of the second class constraints is determining the underlying asset price S completely in terms of volatility, so it plays no role in the path integral. In order to examine the effect of the constraints on the dynamics for both extreme limits, the probability density function is evaluated by using semi-classical arguments, in an analogous manner to that developed in Hagan et al. (2002), for the SABR model.</p>
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</div>Mon, 09 May 2016 11:22:38 +0000mauriccio196527622 at http://www3.unifr.ch/econophysicsMulti-asset Black–Scholes model as a variable second class constrained dynamical system
http://www3.unifr.ch/econophysics/?q=content/multi-asset-black%E2%80%93scholes-model-variable-second-class-constrained-dynamical-system
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In this paper, we study the multi-asset Black–Scholes model from a structural point of view. For this, we interpret the multi-asset Black–Scholes equation as a multidimensional Schrödinger one particle equation. The analysis of the classicalHamiltonian and Lagrangian mechanics associated with this quantum model implies that, in this system, the canonical momentums cannot always be written in terms of the velocities. This feature is a typical characteristic of the constrained system that appears in the high-energy physics. To study this model in the proper form, one must apply Dirac’s method for constrained systems. The results of the Dirac’s analysis indicate that in the correlation parameters space of the multi-assets model, there exists a surface (called the Kummer surface ΣK ,where the determinant of the correlation matrix is null) on which the constraint number can vary. We study in detail the cases with N = 2 and N = 3 assets. For these cases, we calculate the propagator of themulti-asset Black–Scholes equation and show that inside the Kummer ΣK surface the propagator is well defined, but outside ΣK the propagator diverges and the option price is not well defined. On ΣK the propagator is obtained as a constrained path integral and their form depends on which region of the Kummer surface the correlation parameters lie. Thus, the multi-asset Black–Scholes model is an example of a variable constrained dynamical system, and it is a new and beautiful property that had not been previously observed.</p>
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</div>Mon, 09 May 2016 11:11:28 +0000mauriccio196527621 at http://www3.unifr.ch/econophysicsLibor at crossroads: stochastic switching detection using information theory quantifiers
http://www3.unifr.ch/econophysics/?q=content/libor-crossroads-stochastic-switching-detection-using-information-theory-quantifiers
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p><p>This paper studies the 28 time series of Libor rates, classified in seven maturities and four currencies), during the last 14 years. The analysis was performed using a novel technique in financial economics: the Complexity-Entropy Causality Plane. This planar representation allows the discrimination of different stochastic and chaotic regimes. Using a temporal analysis based on moving windows, this paper unveals an abnormal movement of Libor time series arround the period of the 2007<br /><br />
financial crisis. This alteration in the stochastic dynamics of Libor is contemporary of what press called “Libor scandal”, i.e. the manipulation of interest rates carried out by several prime banks. We argue that our methodology is suitable as a market watch mechanism, as it makes visible the temporal redution in informational efficiency of the market.</p></p>
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</div>Thu, 05 May 2016 11:41:46 +0000aurelio27613 at http://www3.unifr.ch/econophysicsA new pro transfer-sensitive measure of economic inequality under the Lorenz curve framework in analogue to the index of refraction of geometrical optics
http://www3.unifr.ch/econophysics/?q=content/new-pro-transfer-sensitive-measure-economic-inequality-under-lorenz-curve-framework-analogue
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><div>
<p>Index of refraction is found to be a good measure of economic inequality within the Lorenz curve framework. It has origin in geometrical optics, where it measures bending of a ray of light passing from one homogeneous transparent medium into another. As light refracts according to characteristics of different media, so also Lorenz curve does according to concentration of wealth or income in different strata. With the sole objective of applying this analogy to the Lorenz curve framework, first, I compute refractive (inequality) index for each stratum in a distribution to study condition in each with respect to the ideal condition, and then simply add all and standardise to propose an overall measure for the whole framework. I utilise data on decile group shares of income or consumption for 149 countries from the UNU-WIDER World Income Inequality Database (WIID3.0b), September 2014. Results are lively and remarkable. While a refractive index value of less than 1.00, in case of light, refers an ‘anomalous refraction’, such a condition of economic inequality is found too common for many of us (50-80 %) in reality. In contrast to that, in most of the countries, the index value of the richest group lies in between the proximities of 2.00 and 5.00, where the same of 1.00 depicts an ideal condition that is enviable. The summative overall measure appears to be pro transfer-sensitive and equivalent to those based on the length of the Lorenz curve and consequently goes beyond the Gini coefficient, which is simply transfer-neutral.</p>
<p><strong>Keywords:</strong> Anomalous inequality, Geometrical optics, Gini coefficient, Refractive inequality index, Refractive Lorenz index</p>
<p><strong>JEL classification: </strong>D310, D630, O150.</p>
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</div>Tue, 26 Apr 2016 02:47:12 +0000amlan27607 at http://www3.unifr.ch/econophysicsThe noisy voter model on complex networks
http://www3.unifr.ch/econophysics/?q=content/noisy-voter-model-complex-networks
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We propose a new analytical method to study stochastic, binary-state models on complex networks. Moving beyond the usual mean-field theories, this alternative approach is based on the introduction of an annealed approximation for uncorrelated networks, allowing to deal with the network structure as parametric heterogeneity. As an illustration, we study the noisy voter model, a modification of the original voter model including random changes of state. The proposed method is able to unfold the dependence of the model not only on the mean degree (the mean-field prediction) but also on more complex averages over the degree distribution. In particular, we find that the degree heterogeneity —variance of the underlying degree distribution— has a strong influence on the location of the critical point of a noise-induced, finite-size transition occurring in the model, on the local ordering of the system, and on the functional form of its temporal correlations. Finally, we show how this latter point opens the possibility of inferring the degree heterogeneity of the underlying network by observing only the aggregate behavior of the system as a whole, an issue of interest for systems where only macroscopic, population level variables can be measured.</p>
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</div>Sat, 23 Apr 2016 17:28:44 +0000Adrián27606 at http://www3.unifr.ch/econophysicsAn alternative measure of economic inequality in the light of optics
http://www3.unifr.ch/econophysics/?q=content/alternative-measure-economic-inequality-light-optics
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>An ideal state of development, when viewed with fantasy, is nothing but a state or condi- tion where light touches everybody without refraction. The diagonal line of the Lorenz Curve Framework represents such an ideal condition. In the presence of inequality, however, it deviates or refracts from the ideal condition. In this paper, I try to measure economic inequality from the index of refraction. First, I compute such an index for each stratum to evaluate condition in each and then add all to propose an overall measure of economic inequality, which appears to be a standardised measure of the length of the Lorenz Curve relative to that of the diagonal line. The exercise is done utilising data on distribution of income or consumption from the WDI 2014. Results are lively and remarkable. While an index value of less than 1.00 represents an `anomalous refraction' in Optics, such a condition of inequality is true and too common for many of us (60-80%) in reality. In contrast to that, in some countries, the index of refraction of the richest group exceeds that of Diamond (2.42), where an index value of 1.00 depicts an ideal condition that is enviable. In regard to technicalities, it goes at par Gini Index and beyond. Additionally, it makes analysis of economic inequality more sensible. Presumably, the proposed index could be a good substitute of the Gini Index as it is found perfectly correlated with the latter by quadratic equation with an Adjusted R Square value of 1.00.</p>
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</div>Sun, 17 Apr 2016 15:03:17 +0000amlan27604 at http://www3.unifr.ch/econophysicsAn alternative measure of economic inequality under the Lorenz curve framework in analogue to the index of refraction of geometrical optics
http://www3.unifr.ch/econophysics/?q=content/alternative-measure-economic-inequality-under-lorenz-curve-framework-analogue-index
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Index of refraction is found to be a good measure of economic inequality within the Lorenz curve framework. It has origin in geometrical optics, where it measures bending of a ray of light passing from one transparent medium into another. As light refracts according to characteristics of different media, so also Lorenz curve does according to concentration of wealth or income in different strata. In line with this analogy, first I compute refractive index for each stratum under the Lorenz curve framework to evaluate condition in each and then simply add all to propose an overall measure for the whole framework. The latter appears to be pro transfer-sensitive and equivalent to the measures based on length of the Lorenz curve. Also, it is related to transfer-neutral Gini coefficient by quadratic equation. The applicability of the approach is tested utilising data on distribution of income or consumption from the WDI 2014. Results are lively and remarkable. While an index value of less than 1.00 represents an ‘anomalous refraction' in optics, such a condition of inequality appears to be too common for many of us in reality. In contrast to that, in some countries, the refractive index of the richest group exceeds that of Diamond (2.42), where an index value of 1.00 depicts an ideal condition that is enviable. Although the preliminary exercise is done with grouped data, it can be extended vividly to the case when the Lorenz curve is continuous.</p>
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</div>Sun, 17 Apr 2016 15:01:41 +0000amlan27603 at http://www3.unifr.ch/econophysicsForecasting stock market returns over multiple time horizons
http://www3.unifr.ch/econophysics/?q=content/forecasting-stock-market-returns-over-multiple-time-horizons-1
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news‐driven, analytic, agent‐based market model developed in Gusev et al. (2015). This heterogeneous framework enables us to capture dynamics at multiple timescales, expanding the model’s applications and improving precision. We study the heterogeneous model theoretically and empirically to highlight essential mechanisms underlying certain market behaviors, such as transitions between bull‐ and bear markets and the self‐similar behavior of price changes. Most importantly, we apply this model to show that the stock market is nearly efficient on intraday timescales, adjusting quickly to incoming news, but becomes inefficient on longer timescales, where news may have a long‐lasting nonlinear impact on dynamics, attributable to a feedback mechanism acting over these horizons. Then, using the model, we design algorithmic strategies that utilize news flow, quantified and measured, as the only input to trade on market return forecasts over multiple horizons, from days to months. The backtested results suggest that the return is predictable to the extent that successful trading strategies can be constructed to harness this predictability.</p>
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</div>Tue, 29 Mar 2016 19:21:56 +0000mvk0027587 at http://www3.unifr.ch/econophysicsPower-law cross-correlations estimation under heavy tails
http://www3.unifr.ch/econophysics/?q=content/power-law-cross-correlations-estimation-under-heavy-tails
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We examine the performance of six estimators of the power-law cross-correlations -- the detrended cross-correlation analysis, the detrending moving-average cross-correlation analysis, the height cross-correlation analysis, the averaged periodogram estimator, the cross-periodogram estimator and the local cross-Whittle estimator -- under heavy-tailed distributions. The selection of estimators allows to separate these into the time and frequency domain estimators. By varying the characteristic exponent of the $\alpha$-stable distributions which controls the tails behavior, we report several interesting findings. First, the frequency domain estimators are practically unaffected by heavy tails bias-wise. Second, the time domain estimators are upward biased for heavy tails but they have lower estimator variance than the other group for short series. Third, specific estimators are more appropriate depending on distributional properties and length of the analyzed series. In addition, we provide a discussion of implications of these results for empirical applications as well as theoretical explanations.</p>
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</div>Thu, 25 Feb 2016 21:12:47 +0000LKristoufek27570 at http://www3.unifr.ch/econophysicsDetecting the Collapse of Cooperation in Evolving Networks
http://www3.unifr.ch/econophysics/?q=content/detecting-collapse-cooperation-evolving-networks
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>The sustainability of structured biological, social, economic and ecological communities are often determined by the outcome of social conflicts between cooperative and selfish individuals (cheaters). Cheaters avoid the cost of contributing to the community and can occasionally spread in the population leading to the complete collapse of cooperation. Although such a collapse often unfolds unexpectedly bearing the traits of a critical transition, it is unclear whether one can detect the rising risk of cheater's invasions and loss of cooperation in an evolving community. Here, we combine dynamical networks and evolutionary game theory to study the abrupt loss of cooperation as a critical transition. We estimate the risk of collapse of cooperation after the introduction of a single cheater under gradually changing conditions. We observe a systematic increase in the average time it takes for cheaters to be eliminated from the community as the risk of collapse increases. We detect this risk based on changes in community structure and composition. Nonetheless, reliable detection depends on the mechanism that governs how cheaters evolve in the community. Our results suggest possible avenues for detecting the loss of cooperation in evolving communities.</p>
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</div>Fri, 12 Feb 2016 09:25:50 +0000mcavaliere27557 at http://www3.unifr.ch/econophysicsVolume One: Geometry without Multiplication
http://www3.unifr.ch/econophysics/?q=content/volume-one-geometry-without-multiplication
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>I propose to write a textbook on the subject of Euclidean geometry. It will be divided into two volumes, <em>Geometry without Multiplication</em> and <em>Geometry with Multiplication</em>.</p>
<p> </p>
<p>I invite comment from other geometers on the foundational material, definitions, proofs that I have done so far and on the organization of the theorems.</p>
<p> </p>
<p>Are there any theorems missing? Are there any out of logical sequence?</p>
<p> </p>
<p>At the end I conclude with some theorems of practical use that can be proven without recourse to multiplication. Are there other practical uses of this theory that you can suggest?</p>
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</div>Wed, 20 Jan 2016 19:44:58 +0000Grozny27525 at http://www3.unifr.ch/econophysicsTrigonometry of Rational Numbers
http://www3.unifr.ch/econophysics/?q=content/trigonometry-rational-numbers
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Brahmagupta invented the additive identity zero about a millennium after Euclid. A rigorous definition for the field of rational numbers was within his grasp! It was only the existence of irrational numbers that stayed his hand. Trigonometry to six decimal digits of accuracy was possible in Brahmagupta’s day, but it would have required that he redefine the unit of angle. Also, he would have had to come to grips with the fact that Dedekind was still a millennium in his future, so he needed to just get busy studying trigonometry within the context of the field of rational numbers. </p>
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</div>Wed, 20 Jan 2016 19:31:34 +0000Grozny27524 at http://www3.unifr.ch/econophysicsGerard Debreu: Ghostly Whipping Boy
http://www3.unifr.ch/econophysics/?q=content/gerard-debreu-ghostly-whipping-boy
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Economics students have a rather fantastic view of the history of their science. Their professors have taught them hate for “mainstream” economics, which does not make sense. Obviously, mainstream is (by definition) what is being taught to undergraduates. The purpose of this paper is to make clear exactly what is now and has been for forty years the mainstream of economic science. </p>
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</div>Wed, 20 Jan 2016 19:27:46 +0000Grozny27523 at http://www3.unifr.ch/econophysicsHow the intelligent non-economist can refute every economist hands-down
http://www3.unifr.ch/econophysics/?q=content/how-intelligent-non-economist-can-refute-every-economist-hands-down
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Most non-economists tend to think that economists know what they are talking about when they use specific terms like income, profit, capital, market equilibrium, and so on. This is not the case. What, then, follows from the well-documented fact that the representative economist has no idea of what profit is? Quite simple: if the core concept profit is false then the whole economic theory/model is false. This holds for the Walrasian, the Keynesian, the Marxian, and the Austrian approach.</p>
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</div>Thu, 17 Dec 2015 17:34:20 +0000EKHandtke27502 at http://www3.unifr.ch/econophysicsIs the Stock Market a Quantum Computational Virtual Reality?
http://www3.unifr.ch/econophysics/?q=content/stock-market-quantum-computational-virtual-reality
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>Recently, quantum gates and quantum circuits have been found when portfolios of stocks were simulated in quantum computation processes, pointing out to the existence of a bizarre quantum code beneath the stock market transactions. The quantum code of the stock market might prove to have a more profound signification if is related to the recent finding of quantum codes at the deepest levels of our reality, such as quantum mechanics of black holes and the space-time of the universe. Could this mysterious stock market quantum code be a tiny fragment of a quantum code that our universe uses to create the physical reality?</p>
<p> </p>
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</div>Fri, 04 Dec 2015 08:22:55 +0000ovidiu6927483 at http://www3.unifr.ch/econophysicsDoes the Wage Gap between Private and Public Sectors Encourage Political Corruption?
http://www3.unifr.ch/econophysics/?q=content/does-wage-gap-between-private-and-public-sectors-encourage-political-corruption
<div class="field field-name-abstract field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even"><p>We present a dynamic network model of corrupt and noncorrupt employees representing two states in the public and private sector. Corrupt employees are more connected to one another and are less willing to change their attitudes regarding corruption than noncorrupt employees. This behavior enables them to prevail and become the majority in the workforce through a first-order phase transition even though they initially represented a minority. In the model, democracy—understood as the principle of majority rule—does not create corruption, but it serves as a mechanism that preserves corruption in the long run. The motivation for our network model is a paradox that exists on the labor market. Although economic theory indicates that higher risk investments should lead to larger rewards, in many developed and developing countries workers in lower-risk public sector jobs are paid more than workers in higher-risk private sector jobs. To determine the long-run sustainability of this economic paradox, we study data from 28 EU countries and find that the public sector wage premium increases with the level of corruption.</p>
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</div>Fri, 30 Oct 2015 13:47:49 +0000Vuk27455 at http://www3.unifr.ch/econophysics