We investigate a simple macroeconomic model where rational inflation expectations is replaced by a boundedly rational, sticky, response to changes in the actual inflation rate. Our expectations rule differs from standard sticky models and incorporates truly 'stuck' behavior as opposed to delayed...

In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of price thresholds to simulate agent behavior over much...

We continue an investigation into a class of agent-based market models that are motivated by a psychologically-plausible form of bounded rationality. Some of the agents in an otherwise efficient hypothetical market are endowed with differing tolerances to the tension caused by being in the...

When modelling the aggregate behavior of a population over long periods of time the standard approach is to consider the system as always being in equilibrium -- using averaging procedures based upon assumptions of rationality, utility-maximization and a high degree of independence amongst the...

We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit Valuation Adjustments (CVA and DVA). Depending on how the...

We suggest an empirical model of investment strategy returns which elucidates the importance of non-Gaussian features, such as time-varying volatility, asymmetry and fat tails, in explaining the level of expected returns. Estimating the model on the (former) Lehman Brothers Hedge Fund Index...

We invert the Black-Scholes formula. We consider the cases low strike, large strike, short maturity and large maturity. We give explicitly the ?rst 5 terms of the expansions. A method to compute all the terms by induction is also given. At the money, we have a closed form formula for implied...

The so-called level crossing analysis has been used to investigate the empirical data set. But there is a lack of interpretation for what is reflected by the level crossing results. The fractional Gaussian noise as a well-defined stochastic series could be a suitable benchmark to make the level...