We show that the quotient of Levy processes of jump-diffusion type has a fat-taileddistribution. An application is to price theory in economics, with the result that fat tails ariseendogenously from modeling of price change based on an excess demand analysis resulting in aquotient of arbitrarily...

The quotient of random variables with normal distributions is examined and proven to have have power law decay, with density f(x)~f_0 x^(-2), with the coefficient depending on the means and variances of the numerator and denominator, and their correlation. We also obtain the conditional...

Implementing a set of microeconomic criteria, we develop price dynamics equations using a function of demand/supply with key symmetry properties. The function of demand/supply can be linear or nonlinear. The type of function determines the nature of the tail of the distribution based on the...