arXiv research

Model studies money exchange stability in social networks.

The Kinetic Gas Theory like two-agent money exchange models, recently introduced in the Econophysics of Wealth distributions, are revisited. The emergence of Boltzmann-Gibbs like distribution of individual money to Pareto's law in the tail of the distribution is examined in terms of 2x2 Transition matrix with a general…

Money was invented to address the difficulty in the double coincidence of wants between the supply and demand when people exchanged their goods and services. There are two information states in society: one is the initial state that people have goods and services due to division of labor; the other is the final state t…

This paper presents a novel study on gas-like models for economic systems. The interacting agents and the amount of exchanged money at each trade are selected with different levels of randomness, from a purely random way to a more chaotic one. Depending on the interaction rules, these statistical models can present dif…

Boltzmann-Gibbs distribution arises as the statistical equilibrium probability distribution of money among the agents of a closed economic system where random and undirected exchanges are allowed. When considering a model with uniform savings in the exchanges, the final distribution is close to the gamma family. In thi…

This paper investigates and compares currency substitution between the currencies of Central and Eastern European (CEE) countries and the euro. In addition, we develop a model with microeconomic foundations, which identifies difference between currency substitution and money demand sensitivity to exchange rate variatio…

The paper analyzes sterling bills of exchange during the first globalization, revealing their global financial role.

The gauge theory of arbitrage was introduced by Ilinski in [arXiv:hep-th/9710148] and applied to fast money flows in [arXiv:cond-mat/9902044]. The theory of fast money flow dynamics attempts to model the evolution of currency exchange rates and stock prices on short, e.g.\ intra-day, time scales. It has been used to ex…

We have studied the statistical mechanics of money circulation in a closed economic system. An explicit statistical formulation of the circulation velocity of money is presented for the first time by introducing the concept of holding time of money. The result indicates that the velocity is governed by behavior pattern…

In this article, we consider the small-time asymptotics of options on a \emph{Leveraged Exchange-Traded Fund} (LETF) when the underlying Exchange Traded Fund (ETF) exhibits both local volatility and jumps of either finite or infinite activity. Our main results are closed-form expressions for the leading order terms of …

An agent-based computational economical toy model for the emergence of money from the initial barter trading, inspired by Menger's postulate that money can spontaneously emerge in a commodity exchange economy, is extensively studied. The model considered, while manageable, is significantly complex, however. It is alrea…

The determinants of the velocity of money have been examined based on life-cycle hypothesis. The velocity of money can be expressed by reciprocal of the average value of holding time which is defined as interval between participating exchanges for one unit of money. This expression indicates that the velocity is govern…

In our simplified description `wealth' is money ($m$). A kinetic theory of gas like model of money is investigated where two agents interact (trade) selectively and exchange some amount of money between them so that sum of their money is unchanged and thus total money of all the agents remains conserved. The probabilit…

The nature of monetary arrangements is often discussed without any reference to its detailed construction. We present a graph representation that allows for a clear understanding of modern monetary systems. First, we show that systems based on commodity money are incompatible with credit. We then study the current char…

Study finds relevance of exchange and inflation rates to economic factors.

Money is a technology for promoting economic prosperity. Over history money has become increasingly abstract, it used to be hardware, gold coins and the like, now it is mostly software, data structures located in banks. Here I propose the logical conclusion of the abstraction of money: to use as money the most general …

We mathematically analyze a simple market model where trading at each point in time involves only two agents with the sum of their money being conserved and with neither parties resulting with negative money after the interaction process. The exchange involves random re-distribution among the two players of a fixed fra…

This study aims to identify the leading of inflation indicators of monetary policy in DRC. The results reveal that the most relevant inflation indicators usually come from the monetary origin than the real sector. Variance decomposition analyzes place in the foreground the rate of exchange, the money supply and the pub…

We study here numerically the behavior of an ideal gas like model of markets having only one non-consumable commodity. We investigate the behavior of the steady-state distributions of money, commodity and total wealth, as the dynamics of trading or exchange of money and commodity proceeds, with local (in time) fluctuat…

The effects of saving and spending patterns on holding time distribution of money are investigated based on the ideal gas-like models. We show the steady-state distribution obeys an exponential law when the saving factor is set uniformly, and a power law when the saving factor is set diversely. The power distribution c…

In this paper, we reveal the attenuation mechanism of anchor of the commodity money from the perspective of logistics warehousing costs, and propose a novel Decayed Commodity Money (DCM) for the store of value across time and space. Considering the logistics cost of commodity warehousing by the third financial institut…

A class of conserved models of wealth distributions are studied where wealth (or money) is assumed to be exchanged between a pair of agents in a population like the elastically colliding molecules of a gas exchanging energy. All sorts of distributions from exponential (Boltzmann-Gibbs) to something like Gamma distribut…

This paper considers ideal gas-like models of trading markets, where each agent is identified as a gas molecule that interacts with others trading in elastic or money-conservative collisions. Traditionally, these models introduce different rules of random selection and exchange between pair agents. Unlike these traditi…

A generalized continuous economic model is proposed for random markets. In this model, agents interact by pairs and exchange their money in a random way. A parameter controls the effectiveness of the transactions between the agents. We show in a rigorous way that this type of markets reach their asymptotic equilibrium …

In this small article one compromise monetization strategy is proposed, which hopefully may lead to a more satisfactory coexistence of IP manufacturers and consumers. The motto is "fair exchange": you use our IP-product, we use your product (in form of money); when you do not need our product any more, we change back.

This paper considers the ideal gas-like model of trading markets, where each individual is identified as a gas molecule that interacts with others trading in elastic or money-conservative collisions. Traditionally this model introduces different rules of random selection and exchange between pair agents. Real economic …

Stablecoins are unstable, but some are more stable than others.

We consider the insurance company as a physical system which is immersed in its environment (the financial market). The insurer company interacts with the market by exchanging the money through the payments for loss claims and receiving the premium. Here in the equilibrium state we obtain the premium by using the canon…

Traders buy and sell financial instruments in hopes of making profit, and brokers are responsible for the transaction. There are several hypotheses and conspiracy theories arguing that in some situations, brokers want their traders to lose money. For instance, a broker may want to protect the positions of a privileged …

Chebyshev polynomials analyze Czech enterprises' stock dynamics.

Machine learning predicts criminal networks' missing partnerships and future behavior.

We give a brief introduction to the Gauge Theory of Arbitrage. Treating a calculation of Net Present Values (NPV) and currencies exchanges as a parallel transport in some fibre bundle, we give geometrical interpretation of the interest rate, exchange rates and prices of securities as a proper connection components. Thi…

In this communication, some economic models given by functional mappings are addressed. These are models for random markets where agents trade by pairs and exchange their money in a random and conservative way. They display the exponential wealth distribution as asymptotic equilibrium, independently of the effectivenes…

This review is about the convenience, the benefits, as well as the destructive capacities of money. It deals with various aspects of money creation, with its value, and its appropriation. All sorts of money tend to get corrupted by eventually creating too much of them. In the long run, this renders money worthless and …

The goal of international trade theories is to explain the exchange of goods and services between different countries, aiming to benefit from it. Albeit the idea is very simple and known since ancient history, smart policy and business strategies need to be implemented by each subject, resulting in a complex as well as…

We present a simple hybrid dynamical model as a tool to investigate behavioral strategies based on trend following. The multiplicative symbolic dynamics are generated using a lognormal diffusion model for the at-the-money implied volatility term structure. Thus, are model exploits information from derivative markets to…

Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of individual agents, a pile of money and a specific trading rule. Whatever the trad…

A simple example shows that losing all money is compatible with a very high Sharpe ratio (as computed after losing all money). However, the only way that the Sharpe ratio can be high while losing money is that there is a period in which all or almost all money is lost. This note explores the best achievable Sharpe and …

For this special issue, the article aims at discussing a few econophysics problems studied so far rather successfully. The following "applications" in micro-econo-physics are considered : (i) financial crashes; it is emphasized that one can distinguish between endogenous and exogenous causes; (ii) portofolio control, s…

We develop the first basic Operational Risk perspective on key risk management issues associated with the development of new forms of electronic currency in the real economy. In particular, we focus on understanding the development of new risks types and the evolution of current risk types as new components of financia…

The statistical mechanics approach to wealth distribution is based on the conservative kinetic multi-agent model for money exchange, where the local interaction rule between the agents is analogous to the elastic particle scattering process. Here, we discuss the role of a class of conservative local operators, and we s…

We consider a simple model of a closed economic system where the total money is conserved and the number of economic agents is fixed. In analogy to statistical systems in equilibrium, money and the average money per economic agent are equivalent to energy and temperature, respectively. We investigate the effect of the …

We use the theory of complex networks in order to quantitatively characterize the formation of communities in a particular financial market. The system is composed by different banks exchanging on a daily basis loans and debts of liquidity. Through topological analysis and by means of a model of network growth we can d…

The distribution of money is analysed in connection with the Boltzmann distribution of energy in the degenerate states of molecules. Plots of the population density of income distribution for various countries are well reproduced by a Gamma function, confirming the validity of the statistical distribution at equilibriu…

The Chicago Board Options Exchange (CBOE) Volatility Index, VIX, is calculated based on prices of out-of-the-money put and call options on the S&P 500 index (SPX). Sometimes called the "investor fear gauge," the VIX is a measure of the implied volatility of the SPX, and is observed to be correlated with the 30-day real…

In this paper the dependence of wealth distribution and the velocity of money on the required reserve ratio is examined based on a random transfer model of money and computer simulations. A fractional reserve banking system is introduced to the model where money creation can be achieved by bank loans and the monetary a…

We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism. Using a linear market impact model, this produces a non-linear two-parametric ex…

In this model study of the commodity market, we present some evidence of competition of commodities for the status of money in the regime of parameters, where emergence of money is possible. The competition reveals itself as a rivalry of a few (typically two) dominant commodities, which take the status of money in turn…