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Int. J. Financial Stud. 2018, 6(2), 38; https://doi.org/10.3390/ijfs6020038

How Macro Transactions Describe the Evolution and Fluctuation of Financial Variables

TVEL, Kashirskoe sh. 49, Moscow 115409, Russia
Received: 9 October 2017 / Revised: 20 March 2018 / Accepted: 23 March 2018 / Published: 29 March 2018
(This article belongs to the Special Issue Financial Economics)
Full-Text   |   PDF [351 KB, uploaded 3 May 2018]

Abstract

The description of the dynamics and fluctuations of macro variables remains one of the most exciting problems of financial economics. This paper models macro variables via the description of transactions between agents. We use risk ratings x of agents as their coordinates in the economic space. Transactions like buy–sell, investment, credits, etc., between agents change their extensive financial and economic variables. Aggregates of transactions between all agents with risk ratings x and y define the macro transactions between points x and y. Macro transactions determine the evolution of macro variables. Interactions between different transactions outline their dynamics and fluctuations. We model macro transactions and the interactions between them by economic hydrodynamic-like equations in the economic space. As an example, for simple model interactions between credit–loans and loans–repayment transactions we derive economic hydrodynamic-like equations and wave equations for near perturbations of macro transactions and study simple wave solutions and their consequences. Waves of macro transactions in the economic space propagate from high to low risk agents or vice versa and define the fluctuations of macro financial variables. The existence and diversity of waves and fluctuations of macro transactions in simple models clarifies the importance of wave processes for macro financial modeling and forecasting. View Full-Text
Keywords: macro transactions; macro finance; financial waves; risk ratings; economic space macro transactions; macro finance; financial waves; risk ratings; economic space
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Olkhov, V. How Macro Transactions Describe the Evolution and Fluctuation of Financial Variables. Int. J. Financial Stud. 2018, 6, 38.

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