BITCOIN AS A POSSIBLE MEANS OF FINANCIAL MARKET FRAUD

The aim of this paper is to present the manipulation possibilities in the operation of information technology. Many authors have already dealt with cryptocurrencies and their investment potential, with special emphasis on bitcoin. Therefore, the aim of this paper is to identify possible manipulative activities in the segment of information technology about bitcoin as a possible means of fraud in the financial market, especially if it is analysed the trend of its movement and potential financial risk. In this paper, the authors investigate in detail the characteristics of securities by linking them to market manipulations. The authors analyse bitcoin as a relative market and financial unknown, explain its origin and the most significant characteristics, and define the risks in terms of possible market manipulations. Finally, the authors analyse the financial bubble that is created around bitcoin and its impact on the economy. The authors analyse that bitcoin and other cryptocurrencies are still suitable for fraudulent activities in financial markets and emphasize the importance of institutions in reducing potential risks. Keywords: bitcoin, institutions, bubble

Cryptocurrencies, Evolution of Means of Payments and Validity of Monetary Principles

The paper explores the role, evolution and ruling principles of the concept of “money” in the 21st Century. In this continuously evolving context, cryptocurrencies and Blockchain technology are widely considered the most relevant monetary innovations of the last decades. By means of a macro-founded logical-analytical approach combined with statistical evidence, the paper provides arguments: 1. dismissing the “innovation myth” behind cryptocurrencies because of de facto representing a comeback of the private issue of means of payments and, more problematically, seigniorage at its best; 2. confirming that crypto-tokens do not comply with basic, still ruling monetary principles; 3. suggesting that excess liquidity is already invested in crypto-markets (which are themselves “inflationary”, namely not backed by real value (i.e. GDP). The concrete risk is, once again in economic history, represented by facing a financial bubble.

Left Frontal EEG Power Responds to Stock Price Changes in a Simulated Asset Bubble Market

Financial bubbles are a result of aggregate irrational behavior and cannot be explained by standard economic pricing theory. Research in neuroeconomics can improve our understanding of their causes. We conducted an experiment in which 28 healthy subjects traded in a simulated market bubble, while scalp EEG was recorded using a low-cost, BCI-friendly desktop device with 14 electrodes. Independent component (IC) analysis was performed to decompose brain signals and the obtained scalp topography was used to cluster the ICs. We computed single-trial time-frequency power relative to the onset of stock price display and estimated the correlation between EEG power and stock price across trials using a general linear model. We found that delta band (1–4 Hz) EEG power within the left frontal region negatively correlated with the trial-by-trial stock prices including the financial bubble. We interpreted the result as stimulus-preceding negativity (SPN) occurring as a dis-inhibition of the resting state network. We conclude that the combination between the desktop-BCI-friendly EEG, the simulated financial bubble and advanced signal processing and statistical approaches could successfully identify the neural correlate of the financial bubble. We add to the neuroeconomics literature a complementary EEG neurometric as a bubble predictor, which can further be explored in future decision-making experiments.

MORTGAGE LENDING MARKET IN THE RUSSIAN FEDERATION: CURRENT STATE, PROBLEMS AND PROSPECTS

Subject. The market of mortgage housing lending in the Russian Federation. Topic. The impact of the coronavirus pandemic on the mortgage lending market. Purpose. Analyze the housing mortgage lending market in the Russian Federation and identify the reasons for its explosive growth in the 3rd and 4th quarters of 2020. Methodology. Methods of comparative analysis of the housing mortgage lending market in the Russian Federation. Results. The possibility of the formation of a financial bubble in the real estate market in Russia is studied, and the probable prospects for the development of the mortgage market are evaluated Application area. The mortgage lending market, including the behavior of borrowers (buyers in the housing market) and the activities of credit institutions. Conclusions. The article analyzes the housing mortgage lending market in the Russian Federation and identifies the reasons for its explosive growth in the 3rd and 4th quarters of 2020. The article examines the impact of the coronavirus pandemic on the mortgage lending market, including the behavior of borrowers (buyers in the housing market) and the activities of credit institutions. The possibility of the formation of a financial bubble in the real estate market in Russia is studied, and the probable prospects for the development of the mortgage market are evaluated. Keywords: mortgage lending, deferred demand, financial bubble, coronavirus pandemic, mortgage lending rate, key rate, average credit rating of the borrower, overdue debt, bankruptcy, reserves for possible losses.

THE CONSEQUENCES OF MORTGAGE EXPANSION AS THE PREREQUISITES OF A BUBBLE DETECTION IN THE RUSSIAN HOUSING MARKET

The housing sector of the Russian economy as an example of an economic branch hardly affected by the 2020 pandemic has been investigated in the paper. The factors of such an indifference have been detected and defined as the prerequisites of the identification of a financial bubble in the segment due to the duality of housing as a financial asset. Tests have been carried out to examine the prerequisites of bounded rational behavior of market agents. The research of the prerequisites has been found to allow us not to reject the hypothesis that the housing market is inefficient. It could be regarded as a forming process of a bubble.

A REVIEW OF THE METHODS OF ECONOMIC AND MATHEMATICAL MODELING BASED ON THE PRINCIPLES OF ECONOPHYSICS. PART 2

A review of theoretical and applied results obtained in the framework of the scientific direction in econophysics at the Department of information systems and mathematical methods in economics is given. The first part gives the concept of a financial bubble and methods for finding them. At the beginning of the article, the development of econophysics is given. Therefore, using the research of physicists as a model, econophysics should begin its research not from the upper floors of an economic building (in the form of financial markets, distribution of returns on financial assets, etc.), but from its fundamental foundations or, in the words of physicists, from elementary economic objects and forms of their movement (labor, its productivity, etc.). Only in this way can econophysics find its subject of study and become a "new form of economic theory". Further, the main prerequisites of financial bubble models in the market are considered: the principle of the absence of arbitrage opportunities, the existence of rational agents, a risk-driven model, and a price-driven model. A well-known nonlinear LPPL model (log periodic power law model) was proposed. In the works of V.O. Arbuzov, it was proposed to use procedures for selecting models. Namely, basic selection, "stationarity" filtering, and spectral analysis were introduced. The results of the model were presented in the works of D. Sornette and his students. The second part gives the concept of percolation and its application in Economics. We will consider a mathematical model proposed by J.P. Bouchaud, D. Stauffer, and D. Sornette that recreates the behavior of an agent in the market and their interaction, geometrically describing a phase transition of the second kind. In this model, the price of an asset in a single time interval changes in proportion to the difference between supply and demand in this market. The results are published in the works of A.A. Byachkova, B.I. Myznikova and A.A. Simonov. There are two types of phase transition: the first and second kind. During the phase transition of the first kind, the most important, primary extensive parameters change abruptly: the specific volume, the amount of stored internal energy, the concentration of components, and other indicators. It should be noted that this refers to an abrupt change in these values with changes in temperature, pressure, and not a sudden change in time. The most common examples of phase transitions of the first kind are: melting and crystallization, evaporation and condensation. During the second kind of phase transition, the density and internal energy do not change. The jump is experienced by their temperature and pressure derivatives: heat capacity, coefficient of thermal expansion, or various susceptibilities. Phase transitions of the second kind occur when the symmetry of the structure of a substance changes: it can completely disappear or decrease. For quantitative characterization of symmetry in a second-order phase transition, an order parameter is introduced that runs through non-zero values in a phase with greater symmetry, and is identically equal to zero in an unordered phase. Thus, we can consider percolation as a phase transition of the second kind, by analogy with the transition of paramagnets to the state of ferromagnets. The percolation threshold or critical concentration separates two phases of the percolation grid: in one phase there are finite clusters, in the other phase there is one infinite cluster. The key situation to study is the moment of formation of an infinite cluster on the percolation grid, since this means the collapse of the market, when the overwhelming part of agents for this market has a similar opinion about their actions to buy or sell an asset. The main characteristics of the process are the threshold probability of market collapse, as well as the empirical distribution function of price changes in this market. Keywords: econophysics, behavior of agents in the market, market crash, second-order phase transition, percolation theory, model calibration, agent model calibration, percolation gratings, gradient percolation model, percolation threshold, clusters, fractal dimensions, phase transitions of the first and second kind.

A REVIEW OF THE METHODS OF ECONOMIC AND MATHEMATICAL MODELING BASED ON THE PRINCIPLES OF ECONOPHYSICS. PART 1

A review of theoretical and applied results obtained in the framework of the scientific direction in econophysics at the Department of Information Systems and Mathematical Methods in Economics is given. The first part gives the concept of a financial bubble and methods for their search. The review covers the period 2010-2019. A review of theoretical and applied results obtained in the framework of the scientific direction in econophysics at the Department of information systems and mathematical methods in Economics is given. The first part gives the concept of a financial bubble and methods for finding them. At the beginning of the article, the development of econophysics is given. Therefore, using the research of physicists as a model, econophysics should begin its research not from the upper floors of an economic building (in the form of financial markets, distribution of returns on financial assets, etc.), but from its fundamental foundations or, in the words of physicists, from elementary economic objects and forms of their movement (labor, its productivity, etc.). Only in this way can econophysics find its subject of study and become a "new form of economic theory". Further, the main prerequisites of financial bubble models in the market are considered: the principle of the absence of arbitrage opportunities, the existence of rational agents, a risk-driven model, and a price-driven model. A well-known nonlinear LPPL model (log periodic power law model) was proposed. In the works of V. O. Arbuzov, it was proposed to use procedures for selecting models. Namely, basic selection, "stationarity" filtering, and spectral analysis were introduced. The results of the model were presented in the works of D. Sornette and his students. The second part gives the concept of percolation and its application in Economics. We will consider a mathematical model proposed by J. P. Bouchaud, D. Stauffer, and D. Sornette that recreates the behavior of an agent in the market and their interaction, geometrically describing a phase transition of the second kind. In this model, the price of an asset in a single time interval changes in proportion to the difference between supply and demand in this market. The key situation to study is the moment of formation of an infinite cluster on the percolation grid, since this means the collapse of the market, when the overwhelming part of agents for this market has a similar opinion about their actions to buy or sell an asset. The main characteristics of the process are the threshold probability of market collapse, as well as the empirical distribution function of price changes in this market.

QUANTITATIVE ANALYSIS OF THE BEHAVIOR OF NATIONAL MEXICAN REAL ESTATE PRICES

OBJECTIVE: To explain Mexican home prices using fundamental, macroeconomic variables in order to identify possible financial bubble tendencies within the Mexican national housing market during the period 2005 to 2018. MATERIAL AND METHOD: The present study analyzes quarterly data of Mexican real estate market prices and various fundamental, macroeconomic variables during the period 2005 to 2018. The quantitative research approach of the study is based on descriptive statistics and regression analyses. RESULTS: The main results of the study are as follows: First, a simple comparison between market prices and fundamental values shows some kind of (preliminary) evidence of bubble tendencies on the Mexican national real estate market. Secondly, a more sophisticated regression analysis concludes that especially the fundamental variables outstanding mortgage volume and unemployment rate can explain real estate market price movements almost perfectly. CONCLUSIONS: The hypothesis of a financial bubble within the national Mexican real estate market is then rejected, in the considered period 2005 to 2018.

Sunk Costs Fallacy in Subprime Bubble (Falacia de costos en burbuja de alto riesgo)

Financial Bubbles have been interest of many people, especially in the academic area. It is necessary to understand them with the seriousness that they deserve, due to their potential to cause social, economic and political disruptions. In this paper I talk about the subprime bubble and its general conditions but it is enriched with the contributions of the behavioral finances, specifically with the role of sunk costs fallacy in the behavior of housing mortgagers instead of the stock investors, as it is usual to talk about them in several researches. It is suggested that sunk cost fallacy may provide an additional and important point of view to understand this financial bubble from a parallel market point of view, because this fallacy could be the reason of holding mortgages that eventually became impossible to get paid, which is supported with the fact of relaxation in credit policy and unethical practices of the banks. Finally, they are discussed, the main consequences and chances experienced after the bubble, putting into consideration to explore this behavior with further researches in housing investors.