Related papers: Martingales, the Efficient Market Hypothesis, and …
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
We consider strictly stationary heavy tailed time series whose finite-dimensional exponent measures are concentrated on axes, and hence their extremal properties cannot be tackled using classical multivariate regular variation that is…
We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that…
This paper explores the identification and estimation of nonseparable panel data models. We show that the structural function is nonparametrically identified when it is strictly increasing in a scalar unobservable variable, the conditional…
In econometrics, the Efficient Market Hypothesis posits that asset prices reflect all available information in the market. Several empirical investigations show that market efficiency drops when it undergoes extreme events. Many models for…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
In the present work we investigate the multiscale nature of the correlations for high frequency data (1 minute) in different futures markets over a period of two years, starting on the 1st of January 2003 and ending on the 31st of December…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
We study the stochastic formalism of inflation beyond the usual slow-roll approximation. We verify that the assumptions on which the stochastic formalism relies still hold even far from the slow-roll attractor. This includes demonstrating…
We study the dynamics of the linear and non-linear serial dependencies in financial time series in a rolling window framework. In particular, we focus on the detection of episodes of statistically significant two- and three-point…
The linear fractional stable motion generalizes two prominent classes of stochastic processes, namely stable L\'evy processes, and fractional Brownian motion. For this reason it may be regarded as a basic building block for continuous time…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
The Black-Scholes implied volatility skew at the money of SPX options is known to obey a power law with respect to the time-to-maturity. We construct a model of the underlying asset price process which is dynamically consistent to the power…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX)…
We analyze the question whether sliding window time averages applied to stationary increment processes converge to a limit in probability. The question centers on averages, correlations, and densities constructed via time averages of the…
Agents' heterogeneity is recognized as a driver mechanism for the persistence of financial volatility. We focus on the multiplicity of investment strategies' horizons, we embed this concept in a continuous time stochastic volatility…
In this paper an arbitrage strategy is constructed for the modified Black-Scholes model driven by fractional Brownian motion or by a time changed fractional Brownian motion, when the volatility is stochastic. This latter property allows the…
Heavy-tailed fluctuations and power law statistics pervade physics, finance, and economics, yet their origin is often ascribed to systems poised near criticality. Here we show that such behavior can emerge far from instability through a…
Rough stochastic volatility models have attracted a lot of attentions recently, in particular for the linear option pricing problem. In this paper, starting with power utilities, we propose to use a martingale distortion representation of…