We prove that in smooth Markovian continuous-time economies with potentially complete asset markets, Radner equilibria with endogenously complete markets exist.
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The existence of complete Radner equilibria is established in an economy which parameters are driven by a diffusion process. Our results complement those in the literature. In particular, we work under essentially minimal regularity conditions and treat time-inhomogeneous case.
This paper highlights the role of risk neutral investors in generating endogenous bubbles in derivatives markets. We find that a market for derivatives, which has all the features of a perfect market except completeness and has some risk neutral investors, can exhibit extreme price movements which represent a violation…
Investor optimizes utility in a market with endogenous pricing.
problem Maximizing utility in an incomplete market with endogenous pricing.
method Characterized optimality via FBSDEs and BSPDEs using generalized subgradients.
result Existence and smoothness of solutions for optimal investment and FBSDEs.
Let and be equivalent probability measures and let be a -dimensional vector of random variables such that and are defined in terms of a weak solution to a -dimensional stochastic differential equation. Motivated by the problem of \emph{endoge…
Study shows measures with MRP are dense in probability space.
problem Endogenous completeness in financial economics.
method Analytic fields and probability measures over open sets.
result Set of measures with MRP is either empty or dense.
The paper tackles reinforcement learning with exogenous variables and rewards.
problem Exogenous state variables and rewards slow reinforcement learning by introducing uncontrolled variation.
method Formalizes exogenous state variables and rewards, decomposes MDP into exogenous and endogenous components, and introduces algorithms to discover these components.
result Optimal policies for the endogenous MDP are also optimal for the original MDP, but the endogenous MDP is easier to solve due to reduced variance.
DynForest predicts event probabilities from longitudinal data, handling endogenous predictors.
problem Predicting individual risk using longitudinal patient history.
method Random survival forests with time-fixed features from longitudinal predictors.
result DynForest provides accurate individual event probability predictions.
Model shows AI adoption amplifies financial market risk through prediction, herding, and cognitive dependency.
problem Systemic risk in financial markets due to AI adoption.
method Developed a unified model within an extended rational expectations framework, incorporating endogenous adoption, performative prediction, algorithmic herding, and cognitive dependency.
result Systemic risk multiplier grows superlinearly with AI penetration, implying tail-loss amplification of 18-54%.
Existence of incomplete Radner equilibrium with endogenous noise tracker.
problem Existence of incomplete Radner equilibrium in a model with endogenous noise tracker.
method Proved existence through a coupled system of ODEs, reduced to two coupled ODEs.
result Endogenous noise tracker leads to higher aggregate welfare for large stock supply.
Transformers can handle endogeneity in linear regression using IV methods.
problem Endogeneity in in-context linear regression models.
method Transformer architecture with gradient-based bi-level optimization and in-context pretraining.
result Transformers provide more robust predictions and estimates than 2SLS in endogenous scenarios.
Easy conditions found for simplifying complex systems.
problem Linearizing complex two-input systems.
method Endogenous dynamic feedback with a dimension of at most two.
result Necessary and sufficient conditions for linearizability.
New findings allow infinite mean intensity Hawkes processes to be stable.
problem Stability condition for Hawkes processes with infinite mean intensity.
method Analysis of Quadratic Hawkes processes with infinite mean intensity.
result Quadratic Hawkes processes are always stationary with infinite mean intensity when total endogeneity ratio exceeds unity.
Endogeneous Versus Exogeneous Shocks in Systems with Memorycond-mat.stat-mech
Systems with long-range persistence and memory are shown to exhibit different precursory as well as recovery patterns in response to shocks of exogeneous versus endogeneous origins. By endogeneous, we envision either fluctuations resulting from an underlying chaotic dynamics or from a stochastic forcing origin which ma…
This paper models financial contagion with endogenously determined market liquidity.
problem Financial contagion and its impact on market liquidity during price drops.
method Developed a joint clearing system for interbank payments, asset prices, and market liquidity, with endogenous market capacity.
result Endogenous market liquidity significantly affects system risk during financial contagion.
Modeling financial markets with endogenous and exogenous noise.
problem Understanding long-range dependence and volatility in financial markets.
method Agent-based and stochastic modeling combining endogenous and exogenous noise.
result Exogenous noise is crucial for comprehensive financial market modeling.
Endogenous business cycles explain higher comovement across countries.
problem Standard models struggle to explain high comovement in business cycles across countries.
method Developed a demand-driven reduced-form model with strategic complementarities and international trade linkages.
result Combining endogenous business cycles with exogenous shocks matches empirical comovement levels.
Study classifies stock price jumps as exogenous or endogenous using news data.
problem Differentiating between exogenous and endogenous price jumps.
method Synchronized news data with order book data to analyze stock price movements.
result Exogenous jumps are abrupt and follow a decaying power-law, while endogenous jumps are progressively accelerating.
In this article we consider the volatility inference in the presence of both market microstructure noise and endogenous time. Estimators of the integrated volatility in such a setting are proposed, and their asymptotic properties are studied. Our proposed estimator is compared with the existing popular volatility estim…
Stochastic Online Instrumental Variable Regression: Regrets for Endogeneity and Bandit Feedbackcs.LG
New method tackles endogeneity in online learning with improved regret bounds.
problem Endogeneity in real data due to omitted variables, strategic behaviors, etc.
method O2SLS (Online Two-Stage Least Squares) for Instrumental Variable (IV) regression.
result O2SLS achieves identification and oracle regret bounds for stochastic online learning.
Test for linearizing 2-input systems with 2D feedback.
problem Linearizability of two-input systems by feedback.
method Algorithmic test for 2D endogenous feedback.
result Systematic derivation of flat outputs.
Volatility fingerprints of large shocks: Endogeneous versus exogeneouscond-mat.stat-mech
Finance is about how the continuous stream of news gets incorporated into prices. But not all news have the same impact. Can one distinguish the effects of the Sept. 11, 2001 attack or of the coup against Gorbachev on Aug., 19, 1991 from financial crashes such as Oct. 1987 as well as smaller volatility bursts? Using a …
Paper corrects bias in online learning algorithms with endogenous data.
problem Dynamic selection problems in online learning algorithms with endogenous data.
method Instrumental-variable-based algorithm to correct bias, proving central limit theorem.
result Obtains true parameter values and low regret levels.
New JPEG algorithm corrects biases in endogenously truncated data.
problem Correcting biases in data with endogenous truncation.
method Semiparametric wavelet-based approach, avoiding matrix computations.
result Corrects both endogenous truncation and covariate shifts biases.
A new boosting method corrects endogeneity bias in instrumental variable regression.
problem Endogeneity bias in instrumental variable regression.
method Causal Gradient Boosting (boostIV) that builds on gradient boosting algorithm.
result boostIV is consistent and performs well in finite samples compared to other methods.
The statistical physics of discovering exogenous and endogenous factors in a chain of eventsphysics.data-an
Method estimates exogenous and endogenous factors from event times.
problem Estimating factors influencing event occurrence.
method Combines inhomogeneous Poisson and Hawkes processes, fits using free energy minimization.
result Four regimes identified based on factor detection.
Typical properties of large random economies with linear activitiescond-mat.stat-mech
We study the competitive equilibrium of large random economies with linear activities using methods of statistical mechanics. We focus on economies with commodities, firms, each running a randomly drawn linear technology, and one consumer. We derive, in the limit with fixed, a complete de…
Optimal Trade Execution Under Endogenous Pressure to Liquidate: Theory and Numerical Solutionsq-fin.PM
Study optimal liquidation in markets with endogenous pressure to sell.
problem Optimal liquidation in markets with endogenous pressure to sell.
method Endogenously modeling price pressure, solving singular ODEs numerically.
result Optimal liquidation strategy consistent with square-root law.
Paper proposes a new model to assess risks in energy storage systems considering both exogenous and endogenous uncertainties.
problem Current risk assessment ignores the stochastic nature of energy storage availability.
method Data-driven unified model with exogenous and endogenous uncertainty description for four types of generic energy storage.
result Comparative results show more severe risks for endogenous uncertainty, suggesting new strategies for system operators.
In order to disentangle the internal dynamics from exogenous factors within the Autoregressive Conditional Duration (ACD) model, we present an effective measure of endogeneity. Inspired from the Hawkes model, this measure is defined as the average fraction of events that are triggered due to internal feedback mechanism…
Market completion achieved with derivative securities in incomplete markets.
problem Achieving market completeness in incomplete markets with derivative securities.
method Conditions on model coefficients and solution of a 2D SDE to ensure market completeness.
result Every local martingale can be represented as a stochastic integral with respect to the -martingale .
New theory shows alliances neither deter nor provoke aggression.
problem The causal effect of alliances on conflict is unclear due to endogeneity issues.
method Innovative generalized joint regression models to account for endogeneity.
result Alliances neither deter nor provoke aggression.
Modeling market impacts leads to perfect hedging strategies.
problem Trading with permanent market impacts and nonlinearity.
method Modeling market impacts using g-expectation and nonlinear stochastic integrals; introducing completeness condition for perfect replication.
result Under certain conditions, derivatives can be perfectly hedged dynamically.
Study optimal reinsurance for insurers with a reinsurer's default risk.
problem Optimal reinsurance for insurers with a reinsurer's default risk.
method Analytical solution for two types of reinsurance contracts.
result Joint effect of reinsurer's default and background risk on reinsurance demand.
Study quantifies contributions of market participants to volatility using Hawkes processes.
problem Quantifying contributions of different market participants to volatility.
method Leveraged Hawkes point processes to analyze the branching properties of market participant behaviors.
result High-frequency traders are more endogenously driven than other types of agents.
Study detects endogenous bubbles in meme stocks using CI.
problem Detecting endogenous bubbles in meme stocks.
method Used Log-Periodic Power Law (LPPL) Confidence Indicator (CI).
result CI detected numerous bubbles in meme stocks but struggled with predicting exogenous rallies.
AC-State discovers minimal latent state for control.
problem Discover minimal latent state from sensory information.
method Multi-step inverse model with information bottleneck.
result Guaranteed discovery of control-endogenous latent states.
The CAPM's market returns are endogenously determined, affecting all assets' expected returns.
problem The standard CAPM's market return assumption is not endogenously consistent.
method Demonstrates the impact of endogenously determined market returns on asset returns and the range of feasible market returns.
result Expected returns are influenced by all assets' risks, and market returns are limited by asset distribution.
We present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control problem for maximizing price regularity and stability while minimizing entanglement …
Study reveals 2020 stock crashes were mostly endogenous, not exogenous.
problem Identifying the cause of the 2020 global stock market crash.
method Applied log-periodic power law singularity (LPPLS) methodology to analyze stock market indexes.
result The 2020 stock market crashes were mostly endogenous, driven by systemic instability.
Novel method identifies structural differences between networks using structural equation models.
problem Identifying structural differences between networks characterized by structural equation models.
method Reparameterization and algorithm design with calibration and construction stages to identify differential structures.
result Our method outperformed independently constructed networks on synthetic data and demonstrated applicability on a real data set.
Paper develops a new estimator for panel data with endogenous treatments, improving causal inference.
problem Challenges in causal inference for static panel data with endogenous treatments and confounding variables.
method Develops Double Machine Learning (DML) estimator for static panel models with endogenous treatments (panel IV DML). Introduces weak-identification diagnostics.
result Panel IV DML estimator improves estimation accuracy and delivers more reliable inference under weak identification.
Survival strategies in a market with self-determined prices are closely tied to log-optimal investment.
problem Survival of wealth in a market with endogenous prices.
method Assume only one's actions affect prices, use log-optimal strategy, disregard actual prices.
result Survival strategies are asymptotically close to log-optimal strategies.
Endogenous versus Exogenous Crashes in Financial Marketscond-mat.stat-mech
We perform an extended analysis of the distribution of drawdowns in the two leading exchange markets (US dollar against the Deutsmark and against the Yen), in the major world stock markets, in the U.S. and Japanese bond market and in the gold market, by introducing the concept of ``coarse-grained drawdowns,'' which all…
A semiparametric instrumental variable approach to optimal treatment regimes under endogeneitystat.ME
Proposes a new method to estimate optimal treatment regimes in the presence of endogeneity.
problem Estimating optimal treatment regimes under endogeneity in observational studies or randomized trials.
method Semiparametric instrumental variable approach with binary instrumental variable.
result Identification and estimation of optimal treatment regimes under endogeneity without direct compliance information.
Graphs explain modern money systems, showing how banks create money and central banks control net money.
problem Understanding the nature and construction of modern monetary systems.
method Graphical representation of balance sheets to illustrate monetary arrangements.
result Commercial banks create endogenous money, while central banks and Treasuries control net money.
A new model for limit order book dynamics with time-dependent arrival rates.
problem Modeling the dynamics of limit order books with time-dependent arrival rates.
method Proposes a stochastic model with endogenous price dynamics and shows the conditional diffusion limit is Brownian meander.
result The model's conditional diffusion limit is the Brownian meander.
We formalize and decompose reinforcement learning problems with exogenous state variables and rewards.
problem Exogenous state variables and rewards slow down reinforcement learning.
method Formalized exogenous state variables and rewards, decomposed MDPs, derived variance-covariance condition, developed algorithms.
result Monte Carlo policy evaluation on the endogenous MDP is accelerated compared to using the full MDP.