Second-order Price Dynamics: Approach to Equilibrium with Perpetual Arbitrage

Economy – Quantitative Finance – General Finance

Scientific paper

Rate now

  [ 0.00 ] – not rated yet Voters 0   Comments 0

Details

Scientific paper

The notion that economies should normally be in equilibrium is by now well-established; equally well-established is that economies are almost never precisely in equilibrium. Using a very general formulation, we show that under dynamics that are second-order in time a price system can remain away from equilibrium with permanent and repeating opportunities for arbitrage, even when a damping term drives the system towards equilibrium. We also argue that second-order dynamic equations emerge naturally when there are heterogeneous economic actors, some behaving as active and knowledgeable arbitrageurs, and others using heuristics. The essential mechanism is that active arbitrageurs are able to repeatedly benefit from the suboptimal heuristics that govern most economic behavior.

No associations

LandOfFree

Say what you really think

Search LandOfFree.com for scientists and scientific papers. Rate them and share your experience with other people.

Rating

Second-order Price Dynamics: Approach to Equilibrium with Perpetual Arbitrage does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Second-order Price Dynamics: Approach to Equilibrium with Perpetual Arbitrage, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Second-order Price Dynamics: Approach to Equilibrium with Perpetual Arbitrage will most certainly appreciate the feedback.

Rate now

     

Profile ID: LFWR-SCP-O-263538

All data on this website is collected from public sources. Our data reflects the most accurate information available at the time of publication.