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Quantitative wave model of macro-finance

Author

Listed:
  • Olkhov, Victor
Abstract
This paper presents macro-finance as ensemble of economic agents and suggests use risk ratings of economic agents as their coordinates on economic space. Financial variables of separate economic agents are defined as functions of time and coordinates on economic space. Aggregations of financial variables of separate economic agents with coordinates near point x on economic space define macro-financial variables as function of x. Hydrodynamic-like equations describe evolution and mutual dependence between macro-financial variables. As example, for simple model of mutual dependence between macro-financial Demand on Investment and Interest Rate we derive hydrodynamic-like equations in a closed form. Perturbations of macro financial variables can generate waves those propagate on economic space and we derive wave equations. Macro financial waves can propagate on economic space with exponential growth of amplitudes and cause time fluctuations of finance variables that may model financial and business cycles. Variety of macro financial waves on economic space gives new look on internal dynamics of macro finance and reveals hidden complexity of macro financial modeling and forecasting.

Suggested Citation

  • Olkhov, Victor, 2017. "Quantitative wave model of macro-finance," International Review of Financial Analysis, Elsevier, vol. 50(C), pages 143-150.
    • Handle: RePEc:eee:finana:v:50:y:2017:i:c:p:143-150
    DOI: 10.1016/j.irfa.2017.02.011
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    References listed on IDEAS

    as
    1. Olkhov, Victor, 2016. "Finance, risk and economic space," MPRA Paper 87172, University Library of Munich, Germany.
    2. Zhiguo He & Péter Kondor, 2016. "Inefficient Investment Waves," Econometrica, Econometric Society, vol. 84, pages 735-780, March.
    3. Olkhov, Victor, 2016. "On Economic Space notion," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 372-381.
    4. 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.
    5. 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.
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    Citations

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    Cited by:

    1. Olkhov, Victor, 2018. "Expectations, Price Fluctuations and Lorenz Attractor," MPRA Paper 89105, University Library of Munich, Germany.
    2. Victor Olkhov, 2018. "Econophysics Beyond General Equilibrium: the Business Cycle Model," Papers 1804.04721, arXiv.org.
    3. Olkhov, Victor, 2018. "Economic Transactions Govern Business Cycles," MPRA Paper 87207, University Library of Munich, Germany.
    4. Olkhov, Victor, 2022. "Why Economic Theories and Policies Fail? Unnoticed Variables and Overlooked Economics," MPRA Paper 114187, University Library of Munich, Germany.
    5. Victor Olkhov, 2017. "Econophysics of Macro-Finance: Local Multi-fluid Models and Surface-like Waves of Financial Variables," Papers 1706.01748, arXiv.org.
    6. Victor Olkhov, 2018. "How Macro Transactions Describe the Evolution and Fluctuation of Financial Variables," IJFS, MDPI, vol. 6(2), pages 1-19, March.
    7. Olkhov, Victor, 2017. "Quantitative Description of Financial Transactions and Risks," MPRA Paper 87316, University Library of Munich, Germany.
    8. Victor Olkhov, 2020. "Volatility Depends on Market Trades and Macro Theory," Papers 2008.07907, arXiv.org, revised Jun 2024.
    9. Olkhov, Victor, 2022. "Introduction of the Market-Based Price Autocorrelation," MPRA Paper 112003, University Library of Munich, Germany.
    10. Olkhov, Victor, 2022. "Economic Policy - the Forth Dimension of the Economic Theory," MPRA Paper 112685, University Library of Munich, Germany.
    11. Olkhov, Victor, 2018. "The Business Cycle Model Beyond General Equilibrium," MPRA Paper 87204, University Library of Munich, Germany.
    12. Olkhov, Victor, 2018. "Economic and Financial Transactions Govern Business Cycles," MPRA Paper 93269, University Library of Munich, Germany.
    13. Victor Olkhov, 2017. "Econophysics of Business Cycles: Aggregate Economic Fluctuations, Mean Risks and Mean Square Risks," Papers 1709.00282, arXiv.org.
    14. Victor Olkhov, 2019. "Financial Variables, Market Transactions, and Expectations as Functions of Risk," IJFS, MDPI, vol. 7(4), pages 1-27, November.
    15. Victor Olkhov, 2017. "Non-Local Macroeconomic Transactions and Credits-Loans Surface-Like Waves," Papers 1706.07758, arXiv.org.

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    More about this item

    Keywords

    Macro-finance modeling; Risk ratings; Economic space; Wave equations;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F00 - International Economics - - General - - - General
    • G00 - Financial Economics - - General - - - General

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