A study on discrete Ponzi scheme model through Sturm-Liouville theory

DOI10.1504/IJDSDE.2021.117359MaRDI QIDQ2113749zbMATH OpenOpenAlexWikidataFDO

Authors Ferhan M. Atıcı, William R. Bennett

Publication date 14 March 2022

Published in International Journal of Dynamical Systems and Differential Equations (Search for Journal in Brave)

Full work available at URL https://doi.org/10.1504/ijdsde.2021.117359

zbMATH Keywords

Charles Ponzidifference equationdiscrete calculusGreen's functioninvestmentPonzi schemerate of returnSturm-Liouville boundary value problem

Mathematics Subject Classification ID

Sturm-Liouville theory (34B24) Discrete version of topics in analysis (39A12) Boundary value problems for difference equations (39A27) Applications of difference equations (39A60) Interest rates, asset pricing, etc. (stochastic models) (91G30)

Review text

Summary: In this paper, we introduce a second order self-adjoint difference equation which describes the dynamics of Ponzi schemes: a type of investment fraud that promises more than it can deliver. We use the Sturm-Liouville theory to study the discrete equation with boundary conditions. The model is based on a promised, unrealistic interest rate \(r_p\), a realised nominal interest rate \(r_n\), a growth rate of the deposits \(r_i\), and a withdrawal rate \(r_w\). Giving some restrictions on the rates \(r_p\), \(r_i\), and \(r_w\), we prove some theorems to when the fund will collapse or be solvent. Two examples are given to illustrate the applicability of the main results.

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Cited in

(2)

• Mathematical models of Ponzi schemes that consider the stochastic nature of decision-making
• Boundary value problems for singular iterative dynamic equations on time scales

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