IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1706.01748.html
   My bibliography  Save this paper

Econophysics of Macro-Finance: Local Multi-fluid Models and Surface-like Waves of Financial Variables

Author

Listed:
  • Victor Olkhov

Abstract

This paper models macro financial variables alike to financial fluids with local interactions and describes surface-like waves of Investment and Profits. We regard macro-finance as ensemble of economic agents and use their risk ratings as coordinates on economic space. Aggregations of agent's financial variables with risk coordinates x on economic space define macro financial variables as function of x. We describe evolution and interactions between macro financial variables alike to financial fluids by hydrodynamic-like equations. Minimum and maximum risk grades define most secure and most risky agents respectively. That determines borders of macro-finance domain that is filled by economic agents. Perturbations of agent's risk coordinates near risk borders of macro domain cause disturbances of macro financial variables like Investment and Profits. Such disturbances can generate waves that propagate along risk borders. These waves may exponentially amplify perturbations inside of macro domain and impact financial sustainability. We study simple model Investment and Profits and describe linear approximation of steady state distributions of Investment and Profits on macro-finance domain that fulfill dreams of Investors: "more risks-more Profits". We describe Investment and Profits waves on risk border of economic space alike to surface waves in fluids. We present simple examples that specify waves as possible origin of time fluctuations of macro financial variables. Description of possible steady state distributions of macro financial variables and financial risk waves on economic space could help for better policy-making and managing sustainable macro-finance.

Suggested Citation

  • Victor Olkhov, 2017. "Econophysics of Macro-Finance: Local Multi-fluid Models and Surface-like Waves of Financial Variables," Papers 1706.01748, arXiv.org.
    • Handle: RePEc:arx:papers:1706.01748
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1706.01748
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Masahisa Fujita, 2010. "The Evolution Of Spatial Economics: From Thünen To The New Economic Geography," The Japanese Economic Review, Japanese Economic Association, vol. 61(1), pages 1-32, March.
    2. Starr,Ross M., 2011. "General Equilibrium Theory," Cambridge Books, Cambridge University Press, number 9780521826457.
    3. Brunnermeier, Markus & Sannikov, Yuliy, 2016. "Macro, Money and Finance: A Continuous Time Approach," CEPR Discussion Papers 11329, C.E.P.R. Discussion Papers.
    4. Brunnermeier, M.K. & Sannikov, Y., 2016. "Macro, Money, and Finance," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1497-1545, Elsevier.
    5. Olkhov, Victor, 2016. "On Economic Space notion," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 372-381.
    6. François Perroux, 1950. "Economic Space: Theory and Applications," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(1), pages 89-104.
    7. Victor Olkhov, 2017. "Econophysics Macroeconomic Model," Papers 1701.06625, arXiv.org.
    8. Victor Olkhov, 2017. "Econophysics of Macroeconomics: "Action-at-a-Distance" and Waves," Papers 1702.02763, arXiv.org.
    9. Starr,Ross M., 2011. "General Equilibrium Theory," Cambridge Books, Cambridge University Press, number 9780521533867.
    10. Olkhov, Victor, 2017. "Quantitative wave model of macro-finance," International Review of Financial Analysis, Elsevier, vol. 50(C), pages 143-150.
    11. Olkhov, Victor, 2016. "Finance, risk and economic space," MPRA Paper 87172, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Victor Olkhov, 2017. "Econophysics of Business Cycles: Aggregate Economic Fluctuations, Mean Risks and Mean Square Risks," Papers 1709.00282, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Victor Olkhov, 2017. "Econophysics of Business Cycles: Aggregate Economic Fluctuations, Mean Risks and Mean Square Risks," Papers 1709.00282, arXiv.org.
    2. Victor Olkhov, 2018. "How Macro Transactions Describe the Evolution and Fluctuation of Financial Variables," IJFS, MDPI, vol. 6(2), pages 1-19, March.
    3. Victor Olkhov, 2017. "Non-Local Macroeconomic Transactions and Credits-Loans Surface-Like Waves," Papers 1706.07758, arXiv.org.
    4. Olkhov, Victor, 2018. "The Business Cycle Model Beyond General Equilibrium," MPRA Paper 87204, University Library of Munich, Germany.
    5. Victor Olkhov, 2017. "Econophysics Macroeconomic Model," Papers 1701.06625, arXiv.org.
    6. Olkhov, Victor, 2018. "Economic Transactions Govern Business Cycles," MPRA Paper 87207, University Library of Munich, Germany.
    7. Victor Olkhov, 2019. "Financial Variables, Market Transactions, and Expectations as Functions of Risk," IJFS, MDPI, vol. 7(4), pages 1-27, November.
    8. Olkhov, Victor, 2018. "Expectations, Price Fluctuations and Lorenz Attractor," MPRA Paper 89105, University Library of Munich, Germany.
    9. Victor Olkhov, 2018. "Econophysics Beyond General Equilibrium: the Business Cycle Model," Papers 1804.04721, arXiv.org.
    10. Olkhov, Victor, 2018. "Economic and Financial Transactions Govern Business Cycles," MPRA Paper 93269, University Library of Munich, Germany.
    11. Olkhov, Victor, 2016. "On Hidden Problems of Option Pricing," MPRA Paper 87173, University Library of Munich, Germany.
    12. Olkhov, Victor, 2017. "Quantitative wave model of macro-finance," International Review of Financial Analysis, Elsevier, vol. 50(C), pages 143-150.
    13. Olkhov, Victor, 2019. "New Essentials of Economic Theory I. Assumptions, Economic Space and Variables," MPRA Paper 93085, University Library of Munich, Germany.
    14. Olkhov, Victor, 2019. "Methods of Economic Theory: Variables, Transactions and Expectations as Functions of Risks," MPRA Paper 95628, University Library of Munich, Germany.
    15. Olkhov, Victor, 2019. "New Essentials of Economic Theory," MPRA Paper 95065, University Library of Munich, Germany.
    16. Olkhov, Victor, 2017. "Quantitative Description of Financial Transactions and Risks," MPRA Paper 87316, University Library of Munich, Germany.
    17. Schmidt, Lawrence D.W., 2012. "On the dimensionality of bounds generated by the Shapley–Folkman theorem," Journal of Mathematical Economics, Elsevier, vol. 48(1), pages 59-63.
    18. Kilenthong, Weerachart T. & Qin, Cheng-Zhong, 2014. "Trade through endogenous intermediaries," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 262-268.
    19. Kanjamapornkul, K. & Pinčák, Richard & Bartoš, Erik, 2016. "The study of Thai stock market across the 2008 financial crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 462(C), pages 117-133.
    20. Olkhov, Victor, 2022. "Why Economic Theories and Policies Fail? Unnoticed Variables and Overlooked Economics," MPRA Paper 114187, University Library of Munich, Germany.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:1706.01748. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.