We compare the state-price density that is implied by the cross-section of options prices with the corresponding density of the underlying asset price that is derived from an equilibrium model with Markovian stochastic volatility. If the data-generating process is of the stochastic volatility...

Here we provide a new approach for investigating competitive interactions in the large. We also study emergent strategic behaviors and analyze the effects of bounded rationality and the mimicry strategy in competitive situations. We show how society gropes its way towards equilibrium in an...

The adoption of inflation targets by a number of industrialised countries in the last decade has reawakened interest in the study of rules to characterise monetary policy. In the literature a clear distinction is drawn between instrument rules, such as that of Taylor, which are backward looking,...

Interval arithmetic and computational (automatic) differentiation are powerful methods for use in optimization. Interval arithmetic operates on interval values rather than points and can be used to examine large areas of a space, often eliminating portions shown not to contain the global...

In mainstream microeconomic theory firms are assumed to maximize profits. This useful assumption enables economists to derive demand and supply functions and estimate them with market data. The rarely asked question is: how do businessmen optimize and how closely do their efforts achieve optimum...

This paper presents tractable and efficient numerical solutions to general equilibrium models of asset prices and consumption when the representative agent has recursive preferences. It provides a discrete-time presentation of the approach of Fisher and Gilles (1998), treating continuous-time...

This paper applies evolutionary modeling to expectation formation of an asset's price. As a first step, I consider a population of n investors each of whom takes on one of two possible cultural variants. Every individual is a potential role model for all other individuals and can pass on their...

Various studies of asset markets have shown that traders are capable of learning. In this paper we replace human traders with artificial-intelligent software agents in a simulated stock market. They make predictions about the future, randomly submit their quotes, and transact at certain price. A...

Generalizing the Fisher equation for the term structure of interest rates, we analyse the influence of the premium risk on the long-run interest rate. The existence of the risk premium causes an inequality between the forward interest rates and the expected interest rates. We give an alternative...

In the past few years, we have witnessed a tremendous proliferation of transactions using the Internet as a virtual marketplace. U.S. News and World Report estimates the value of electronic commerce around $13 billion in 1998. In addition to transactions where prices are posted, sellers also use...