This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of trading processes, which is critical in the dynamics of...

Jan Tinbergen, the first recipient of the Nobel Memorial Prize in Economics in 1969, obtained his PhD in physics at the University of Leiden under the supervision of Paul Ehrenfest in 1929. Among many achievements as an economist after his training as a physicist, Tinbergen proposed the...

Standard economic theory makes an allowance for the agency problem, but not the compounding of moral hazard in the presence of informational opacity, particularly in what concerns high-impact events in fat tailed domains (under slow convergence for the law of large numbers). Nor did it look at...

We analyze empirical data from the internet auction site Aukro.cz. The time series of activity shows truncated fractal structure on scales from about 1 minute to about 1 day. The distribution of waiting times as well as the distribution of number of auctions within fixed interval is a power law,...

We study capital requirements for bounded financial positions defined as the minimum amount of capital to invest in a chosen eligible asset targeting a pre-specified acceptability test. We allow for general acceptance sets and general eligible assets, including defaultable bonds. Since the...

For portfolio choice problems with proportional transaction costs, we discuss whether or not there exists a "shadow price", i.e., a least favorable frictionless market extension leading to the same optimal strategy and utility. By means of an explicit counter-example, we show that shadow prices...

Different variants of MFDFA technique are applied in order to investigate various (artificial and real-world) time series. Our analysis shows that the calculated singularity spectra are very sensitive to the order of the detrending polynomial used within the MFDFA method. The relation between...

We consider the problem of superhedging under volatility uncertainty for an investor allowed to dynamically trade the underlying asset, and statically trade European call options for all possible strikes with some given maturity. This problem is classically approached by means of the Skorohod...

We consider Constant Proportion Portfolio Insurance (CPPI) and its dynamic extension, which may be called Dynamic Proportion Portfolio Insurance (DPPI). It is shown that these investment strategies work within the setting of F\"ollmer's pathwise It\^o calculus, which makes no probabilistic...

Using the mechanics of creep in material sciences as a metaphor, we present a general framework to understand the evolution of financial, economic and social systems and to construct scenarios for the future. In a nutshell, highly non-linear out-of-equilibrium systems subjected to exogenous...