Download This PaperOn Economic Space Notion
International Review of Financial Analysis 47 (2016) 372-381 DOI-10.1016/j.irfa.2016.01.001
26 Pages Posted: 2 Aug 2016 Last revised: 12 Apr 2017
Date Written: April 12, 2015
Abstract
This paper introduces Economic Space notion to expand capacity for economic and financial modeling. Introduction of Economic Space allows define economic variables as functions of time and coordinates and opens the way for treating economic and financial relations similar to mathematical physics equations. Economic Space allows study economic models on discreet and continuous spaces with different dimensions. The number of risks measured simultaneously determines Economic Space dimension. We present examples of modeling on Economic Space: option pricing and derivation of Black-Scholes-Merton equation on n-dimensional Economic Space; Markov processes and derivation of Fokker-Plank Equations. Usage of Economic Space allows construe approximations of Economics and Finance similar to physical Kinetics and Hydrodynamics and derive Wave Equations for Economic and Financial variables.
Keywords: Financial Modeling, Economic Space, Risk Ratings, Economic Wave Equations
JEL Classification: C500, C520, C530, C600, G110, G130
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