Related papers: Escaping the Brownian stalkers
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…
We propose a non linear Langevin equation as a model for stock market fluctuations and crashes. This equation is based on an identification of the different processes influencing the demand and supply, and their mathematical transcription.…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
We introduce a simple framework in which market participants update their prior about an efficient price with a model-based learning process. We show that exponential intensities for the arrival of aggressive orders arise naturally in this…
The stock market is heavily influenced by investor sentiment, which can drive buying or selling behavior. Sentiment analysis helps in gauging the overall sentiment of market participants towards a particular stock or the market as a whole.…
We formalize the paradox of an omniscient yet lazy investor - a perfectly informed agent who trades infrequently due to execution or computational frictions. Starting from a deterministic geometric construction, we derive a closed-form…
Replacing Black-Scholes' driving process, Brownian motion, with fractional Brownian motion allows for incorporation of a past dependency of stock prices but faces a few major downfalls, including the occurrence of arbitrage when implemented…
Statistical analysis of financial data most focused on testing the validity of Brownian motion (Bm). Analysis performed on several time series have shown deviation from the Bm hypothesis, that is at the base of the evaluation of many…
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…
The paper presents a step forward into the development of the theory of meaning. Stock and financial markets are examined from communication-theoretical perspective on the dynamics of information and meaning. This study focuses on the link…
Circular Dyson Brownian motion describes the Brownian dynamics of particles on a circle (periodic boundary conditions), interacting through a logarithmic, long-range two-body potential. Within the log-gas picture of random matrix theory, it…
A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy.…
We present several models to describe the stochastic evolution of stocks that show some strong resistance at some level and generalize to this situation the evolution based upon geometric Brownian motion. If volatility and drift are related…
We pursue the quantum-mechanical challenge to the efficient market hypothesis for the stock market by employing the quantum Brownian motion model. We utilize the quantum Caldeira-Leggett master equation as a possible phenomenological model…
The optimal strategies for a long-term static investor are studied. Given a portfolio of a stock and a bond, we derive the optimal allocation of the capitols to maximize the expected long-term growth rate of a utility function of the…
Classical technical analysis methods of stock evolution are recalled, i.e. the notion of moving averages and momentum indicators. The moving averages lead to define death and gold crosses, resistance and support lines. Momentum indicators…
A new model for stock price fluctuations is proposed, based upon an analogy with the motion of tracers in Gaussian random fields, as used in turbulent dispersion models and in studies of transport in dynamically disordered media. Analytical…
Financial markets are an intriguing place that offer investors the potential to gain large profits if timed correctly. Unfortunately, the dynamic, non-linear nature of financial markets makes it extremely hard to predict future price…
In financial time series there are periods in which the value increases or decreases monotonically. We call those periods elemental trends and study the probability distribution of their duration for the indices DJIA, NASDAQ and IPC. It is…