Related papers: The 2006-2008 Oil Bubble and Beyond
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…
While the original Ait-Sahalia interest rate model has been found considerable use as a model for describing time series evolution of interest rates, it may not possess adequate specifications to explain responses of interest rates to…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…
Using a recently introduced rational expectation model of bubbles, based on the interplay between stochasticity and positive feedbacks of prices on returns and volatility, we develop a new methodology to test how this model classifies 9…
The pre-big bang's inflationary mechanism, when allowance is made for the rapid change of Newton's constant, is not actually of pole-law form . We give examples where pole-law inflation, which requires violation of the weak-energy…
Is the elasticity of intertemporal substitution (EIS) more or less than one? This question can be answered by confronting theoretical results of asset pricing models with investor behaviour during episodes of stock market panic. If we…
In this chapter we studied the nonlinear co-movements between the Mexican Crude Oil price, the Mexican Stock Market Index and the USD/MXN Exchange Rate, for the sample period from 1994 to date. We used a battery of nonlinear tests, cf.…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
We consider a simple stochastic differential equation for modeling bubbles in social context. A prime example is bubbles in asset pricing, but similar mechanisms may control a range of social phenomena driven by psychological factors (for…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
It is already understood that the increasing observational evidence for an open Universe can be reconciled with inflation if our horizon is contained inside one single huge bubble nucleated during the inflationary phase transition. In this…
We propose a novel model, the Hyped Log-Periodic Power Law Model (HLPPL), to the problem of quantifying and detecting financial bubbles, an ever-fascinating one for academics and practitioners alike. Bubble labels are generated using a…
Fifty North Sea oil & gas investment transactions were analysed using traditional spreadsheet based financial modelling methods. The purpose of the analysis was to determine if there was a statistically significant relationship between the…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
This paper shows that jumps in financial asset prices are often erroneously identified and are, in fact, rare events accounting for a very small proportion of the total price variation. We apply new econometric techniques to a comprehensive…
This study investigates the relationship between the market volatility of the iShares Asia 50 ETF (AIA) and economic and market sentiment indicators from the United States, China, and globally during periods of economic uncertainty.…
Research has shown banks match interest income and expense betas, and thereby obtain net interest income margins which are insensitive to changes in short-term interest rates. The present analysis extends this research in a number of ways.…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…