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Expenditure Decision and Energy in Portfolio Game

Author

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  • Martin Jančar

Abstract

After formalizing transactions, production, investment process and another economic activities author has returned back to general dynamic in portfolio play. Idea of this article is to postulate the assumption on agent's strategy on money expenditure or other asset's strategy. There are two main assumptions. First one is that players exercise only transactions in environment with constant prices. Second assumption is that a force is introduced for specifying strategy. Forces influence the movement of portfolio according to classical Newton equation. Motivation is author's conviction about generality of some physic law. Only four expenditure strategies are studied. They are analogies to free fall, oscillator, more axis oscillator and general potential energy field. Author thinks that there is very reasonable economic interpretation of such artificial movements. Common approach in article is that the first equation is formalizing the exchange of goods and the second equation describes acceleration on player's current account using physical analogy. This type of acceleration of expenditure is then possible to formulate as integral of movements and is similar to conservation law for sum of kinetic and potential energy in physics. Article presents a vision of kinetic energy of money balances and potential energy of the stock of goods.

Suggested Citation

  • Martin Jančar, 2000. "Expenditure Decision and Energy in Portfolio Game," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 7(12).
  • Handle: RePEc:czx:journl:v:7:y:2000:i:12:id:94
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    File URL: http://ces.utia.cas.cz/bulletin/index.php/bulletin/article/view/94
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    References listed on IDEAS

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    1. Dirk Tasche, 2004. "The single risk factor approach to capital charges in case of correlated loss given default rates," Papers cond-mat/0402390, arXiv.org, revised Feb 2004.
    2. Konstantin Belyaev & Aelita Belyaeva & Tomas Konecny & Jakub Seidler & Martin Vojtek, 2012. "Macroeconomic Factors as Drivers of LGD Prediction: Empirical Evidence from the Czech Republic," Working Papers 2012/12, Czech National Bank, Research Department.
    3. Acharya, Viral V. & Bharath, Sreedhar T. & Srinivasan, Anand, 2007. "Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries," Journal of Financial Economics, Elsevier, vol. 85(3), pages 787-821, September.
    4. Jiri Witzany, 2011. "A Two Factor Model for PD and LGD Correlation," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 18(28).
    5. Jon Frye, 2000. "Depressing recoveries," Emerging Issues, Federal Reserve Bank of Chicago, issue Oct.
    6. Stefano Caselli & Stefano Gatti & Francesca Querci, 2008. "The Sensitivity of the Loss Given Default Rate to Systematic Risk: New Empirical Evidence on Bank Loans," Journal of Financial Services Research, Springer;Western Finance Association, vol. 34(1), pages 1-34, August.
    7. Seidler, Jakub & Horvath, Roman & Jakubík, Petr, 2009. "Estimating expected loss given default in an emerging market: the case of Czech Republic," Journal of Financial Transformation, Capco Institute, vol. 27, pages 103-107.
    8. De Graeve, F. & Kick, T. & Koetter, M., 2008. "Monetary policy and financial (in)stability: An integrated micro-macro approach," Journal of Financial Stability, Elsevier, vol. 4(3), pages 205-231, September.
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    More about this item

    Keywords

    Portfolio; expenditure strategy; law of motions; stock evaluation;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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