Artzrouni, Marc (2009): The mathematics of Ponzi schemes.
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A first order linear differential equation is used to describe the dynamics of an investment fund that promises more than it can deliver, also known as a Ponzi scheme. The model is based on a promised, unrealistic interest rate; on the actual, realized nominal interest rate; on the rate at which new deposits are accumulated and on the withdrawal rate. Conditions on these parameters are given for the fund to be solvent or to collapse. The model is fitted to data available on Charles Ponzi's 1920 eponymous scheme and illustrated with a philanthropic version of the scheme.
|Item Type:||MPRA Paper|
|Original Title:||The mathematics of Ponzi schemes|
|Keywords:||Ponzi scheme; differential equation; market; bond|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G10 - General|
|Depositing User:||Marc Artzrouni|
|Date Deposited:||04. Apr 2009 11:40|
|Last Modified:||11. Feb 2013 18:20|
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