A new theory explains financial markets using gambling and human decision-making.
problem No theory satisfies both practitioners and theorists for explaining market anomalies and exceptional returns.
method Combines gambling theory, human decision-making, and strategic problem-solving.
result Proposes a new theory (S SAFM) to explain financial market behavior.
Study uses cohomology theory to analyze 2008 financial crisis in Thai stock market.
problem Analyzing the 2008 financial crisis in the Thai stock market.
method Hybrid mathematical superstructure with cohomology theory, Pauli matrix, and Wilson loop.
result Identified the 2008 financial market crash using cohomology group of sphere over tensor field.
Model financial time series using φ^4 quantum field theory.
problem Inaccuracies in Ising models for financial data.
method φ^4 quantum field theory with inhomogeneous couplings.
result Accurately reproduces higher-order statistics like market kurtosis.
Defines financial models without probability theory.
problem Establishing martingale theory without probability.
method Introducing supermartingales, martingales, and semimartingales in continuous price paths.
result Probability-free versions of martingale results established.
This paper uses MIS to identify key financial institutions with minimal risk contagion.
problem Mitigating systemic risk during extreme financial events.
method Applying extreme value theory and MIS from graph theory to identify diversified portfolios.
result Identified a subset of institutions with minimal extremal dependence for diversified portfolios.
The main goal of this paper is presentation a modern axiomatic approach to financial arithmetic. At the first, the axiomatic financial arithmetic theory was proposed by Peccati who has introduced the axiomatic definition of the future value. This theory has been extensively developed in past years. Proposed approach to…
Social media signals are most informative about financial volatility when sentiment is high.
problem Understanding when social media can predict financial market volatility.
method Cluster analysis of social and financial variables using information theory.
result Social media is most informative about financial volatility when the ratio of bullish to bearish sentiment is high.
The 1/3 Financial Rule helps prevent household bankruptcy through balanced spending, savings, and debt repayment.
problem Reducing household bankruptcy risk through effective financial planning.
method Mathematical modeling, game theory, behavioral finance, and technological analysis.
result The 1/3 Financial Rule emerges as a robust solution for supporting household financial stability.
Financial losses follow earthquake-like patterns, study finds.
problem Analyzing the timing between financial market losses.
method Fitting empirical interevent times with a Hawkes process.
result Financial market losses exhibit long-term memory similar to earthquakes.
The paper applies information theory to financial markets, improving risk management and asset allocation.
problem Improving risk management and asset allocation in financial markets.
method Information-theoretic measures (entropy, mutual information, etc.) applied to financial time series.
result Normalized mutual information (NMI) is a powerful measure of temporal dependence in financial markets.
Quantum theory explains price dynamics in financial markets, capturing bid-ask spread and ergodicity.
problem Nature of price formation in financial markets and bid-ask spread dynamics.
method Developed a quantum coupled-wave theory using a 2x2 price operator with eigenvalues representing bid and ask prices.
result The theory adequately models bid-ask spread and directional price movement due to quantum-chaotic interaction.
Proposes a method to model financial returns with extreme shocks using flexible tail transformations.
problem Capturing extreme shocks in financial return data.
method Introduces a transformation layer in normalizing flows to model heavy-tailed distributions.
result Trained models can generate synthetic sets of extreme returns.
Improved eigenvalue distribution method for financial data.
problem Noise and complexity in financial markets.
method Matrix H theory, hierarchical structure, informational cascade.
result Captures a larger fraction of data variance in financial markets.
The new business paradigms originate a strong necessity to re-think the theory of the firm with the aim to get a better understanding on the organizational and functional principles of the firm, operating in the investment economies in the prosperous societies. In this connection, we make the innovative research to adv…
Study reveals structural differences in financial networks near and far from crises using balance theory.
problem Understanding the complex behavior of stocks and their collective behavior in financial crises.
method Investigates financial networks by triplet interaction in the framework of balance theory, focusing on higher-order interactions.
result Formation of an ordered structure in crisis networks makes them resistant to disorder, with a critical temperature measuring crisis strength.
Model financial markets using information theory with a single parameter.
problem Capture the complexity of financial markets with a simple model.
method Derive an idealized model based on four information-theoretic assumptions, minimizing surprisal and divergence.
result The model uses squared radial Ornstein-Uhlenbeck processes for state variables and their sums.
We analyze the financial crash in 2008 for different financial markets from the point of view of log-periodic function model. In particular, we consider Dow Jones index, DAX index and Hang Seng index. We shortly discuss the possible relation of the theory of critical phenomena in physics to financial markets.
LLMs simulate financial markets, revealing consistent trading strategies and market dynamics.
problem Testing financial theories with AI trading agents.
method Simulated stock market with LLMs using a persistent order book and varied strategies.
result LLMs can simulate different trading strategies and market dynamics.
This paper applies quantum theory to cost accounting, focusing on WIP valuation.
problem Uncertainties in WIP valuation in cost accounting.
method Quantum theory applied to WIP valuation in cost accounting.
result More nuanced understanding of uncertainties in managerial accounting.
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 instruments are bonds and equities. More than 30 years ago Mehra and Prescott f…
The paper explores financial theory and information theory relations.
problem Understanding the exactness of financial relations.
method Exploring portfolio theory and Bregman divergences.
result Portfolio theory leads to Bregman divergences, and these are proportional to information divergence under specific conditions.
Modeling financial systemic risk with optimal control theory for stability.
problem Analyzing and stabilizing systemic risk in interconnected financial entities.
method Developed a theoretical model using optimal control theory, including steps for synthesizing stabilizing controllers.
result The model ensures that the H∞ norms of the mappings from disturbance to output are less than a predefined constant, stabilizing the system. Article explains why gambling is crucial for market efficiency.
problem Inefficiency of traditional market theories.
method Introduces gambling theory as a superior approach.
result Gambling theory can reveal profitable trading systems.
Kinetic theory explains financial Brownian motion from trader dynamics.
problem Understanding financial Brownian motion from high-frequency trading dynamics.
method Deriving time-evolution equations, Bogoliubov-Born-Green-Kirkwood-Yvon hierarchies, Boltzmann-like and Langevin-like equations.
result Mathematical foundation for financial Brownian motion parallels physical Brownian motion.
We price financial models using optimization and probability theory.
problem Financial model pricing under risk-averse investors.
method Infinite dimensional optimization, probabilistic and functional analytic tools.
result Existence of optimal strategies and convergence of reservation prices.
Novel CMG framework improves financial sentiment forecasting.
problem Challenges in short-term sentiment forecasting of financial OHLC data.
method Integrates chaos theory, Markov chains, and Gaussian processes with transformer models.
result Consistently outperforms traditional models in accuracy and efficiency.
New concept of partial law invariance connects decision theory and financial risk management.
problem Connecting decision theory and financial risk management under uncertainty.
method Characterizing partially law-invariant coherent risk measures via a novel representation formula.
result Strong partial law invariance bridges the gap between existing risk measure representations.
The last financial and economic crisis demonstrated the dysfunctional long-term effects of aggressive behaviour in financial markets. Yet, evolutionary game theory predicts that under the condition of strategic dependence a certain degree of aggressive behaviour remains within a given population of agents. However, as …
Study examines UK firms' financial performance linked to corporate governance.
problem Impact of corporate governance on UK firms' financial performance.
method Cross-sectional regression analysis of 252 firms in 2014.
result Corporate governance mechanisms have mixed effects on financial performance.
New method uses impact IRR to assess impact investments.
problem Determining financial returns of impact investments remains challenging.
method Adapts modern portfolio theory and financial tools to evaluate impact investments.
result Demonstrates the feasibility and utility of impact IRR for optimizing impact investments.
The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states of financial markets offer substantial evidences from the fields of finance, ma…
In an informal way, a number of thoughts on the financial crisis 2008 are presented from a physicist's viewpoint, considering the problem as a nonergodicity transition of a spin-glass type of system. Some tentative suggestions concerning the way out of the crisis are also discussed, concerning Keynesian "deficit spendi…
Model predicts stock price dynamics using quantum gauge theory.
problem Predicting short-term stock price movements.
method Path integral model based on quantum gauge theory.
result Model accurately predicts stock price distributions.
Complex network theory models China's credit system to control systemic risk.
problem Insufficient understanding of China's credit network structure during financial crises.
method Constructed bipartite financial institution-firm network and analyzed its typological properties.
result Credit network structure can amplify local risks to the whole economy.
Agents learn implied volatility in financial markets, resolving theory-practice gap.
problem Inconsistent volatility across strike prices in Black-Scholes models.
method Introduce learning agents updating beliefs based on market opinions, prove convergence using control theory.
result Opinion dynamics converge to true implied volatility, resolving model-practice discrepancy.
New pricing theory solves St. Petersburg paradox.
problem St. Petersburg Paradox unresolved for 280 years.
method Proposes new pricing theory with fair pricing rules.
result New pricing theory resolves the paradox.
The paper analyzes various portfolio management strategies for synthetic and real assets.
problem Managing investment portfolios in financial mathematics and engineering.
method Probability theory and analysis of different market conditions.
result No universal strategy exists; performance varies based on market conditions and investment time.
A simple quantitative example of a reflexive feedback process and the resulting price dynamics after an exogenous price shock to a financial network is presented. Furthermore, an outline of a theory that connects financial reflexivity, which stems from cross-ownership and delayed or incomplete information, and no-arbit…
Quantum theory explains financial market price fluctuations.
problem Understanding price formation in financial markets without quantum mechanics.
method Developed a quantum theory of securities price formation and dynamics, introducing disorder from trading environment.
result Price distributions exhibit speckle-pattern fluctuations, with returns having high probability of occurrence at times.
This article aims at reviewing recent empirical and theoretical developments usually grouped under the term Econophysics. Since its name was coined in 1995 by merging the words Economics and Physics, this new interdisciplinary field has grown in various directions: theoretical macroeconomics (wealth distributions), mic…
I sketch a program for a microeconomic theory of the main component of the business cycle as a recurring disequilibrium, driven by incompleteness of the financial market and by information asymmetries between borrowers and lenders. This proposal seeks to incorporate five distinct but connected processes that have been …
Paper values equity warrants using uncertain calculus.
problem Valuing equity warrants in uncertain financial markets.
method Used uncertain calculus to solve equity warrants pricing problem.
result Equation for equity warrants pricing derived for uncertain stock model.
The article presents a translation of some widespread financial terminology into the language of decision theory. For instance, financial leverage can be regarded as an object of choice or a decision. We show how the optics of decision theory allows perceiving the recently introduced metrics of see-through-leverage, wh…
Study shows long-term debt impacts financial growth of non-financial firms listed at Nairobi Securities Exchange.
problem Declining financial performance and reluctance to lend to non-financial firms listed at Nairobi Securities Exchange.
method Descriptive and panel data analysis of 45 non-financial firms over 10 years.
result Long-term debt positively and significantly influences financial growth measured by earnings per share and market capitalization.
The paper tackles catastrophic risk in reinforcement learning using extreme value theory.
problem Mitigating catastrophic risk in sequential decision making with limited observations.
method Developed POTPG, a policy gradient algorithm based on extreme value theory.
result POTPG outperforms common benchmarks in numerical experiments.
Study assesses short-term debt's impact on non-financial firms' financial growth.
problem Declining financial performance and reluctance to lend to non-financial firms listed at Nairobi Securities Exchange.
method Explanatory research design, descriptive statistics, and panel data analysis.
result Short-term debt positively and significantly influences financial growth.
In this paper we present a rather general phenomenological theory of tick-by-tick dynamics in financial markets. Many well-known aspects, such as the Lévy scaling form, follow as particular cases of the theory. The theory fully takes into account the non-Markovian and non-local character of financial time series. Predi…
The paper models financial markets using information theory to minimize information.
problem Understanding the dynamics of financial markets.
method Modeling financial market dynamics with independent stationary scalar diffusions, interpreting the market as a communication system, and minimizing information-theoretical joint information.
result Financial market dynamics are represented by squared radial Ornstein-Uhlenbeck processes with additivity and self-similarity properties.