Related papers: Solvable Stochastic Dealer Models for Financial Ma…

This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…

In the classical model of stock prices which is assumed to be Geometric Brownian motion, the drift and the volatility of the prices are held constant. However, in reality, the volatility does vary. In quantitative finance, the Heston model…

Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…

We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…

This paper presents a novel study on gas-like models for economic systems. The interacting agents and the amount of exchanged money at each trade are selected with different levels of randomness, from a purely random way to a more chaotic…

We propose a three-state microscopic opinion formation model for the purpose of simulating the dynamics of financial markets. In order to mimic the heterogeneous composition of the mass of investors in a market, the agent-based model…

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…

This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…

In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…

Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…

Stochastic storage models based on essentially non-Gaussian noise are considered. The stochastic description of physical systems based on stochastic storage models is associated with generalized Poisson (or shot) noise, in which the jump…

We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…

Models of auctions or tendering processes are introduced. In every round of bidding the players select their bid from a probability distribution and whenever a bid is unsuccessful, it is discarded and replaced. For simple models, the…

In this paper we introduce a completely continuous and time-variate model of the evolution of market limit orders based on the existence, uniqueness, and regularity of the solutions to a type of stochastic partial differential equations…

We study an optimal execution problem with uncertain market impact to derive a more realistic market model. We construct a discrete-time model as a value function for optimal execution. Market impact is formulated as the product of a…

We consider the problem of supply and demand balancing that is stated as a minimization problem for the total expected revenue function describing the behavior of both consumers and suppliers. In the considered market model we assume that…

We investigate the mechanisms behind the power-law distribution of stock returns using artificial market simulations. While traditional financial theory assumes Gaussian price fluctuations, empirical studies consistently show that the tails…

Following a long tradition of physicists who have noticed that the Ising model provides a general background to build realistic models of social interactions, we study a model of financial price dynamics resulting from the collective…

We propose a simple stochastic volatility model which is analytically tractable, very easy to simulate and which captures some relevant stylized facts of financial assets, including scaling properties. In particular, the model displays a…

This article present a continuous cascade model of volatility formulated as a stochastic differential equation. Two independent Brownian motions are introduced as random sources triggering the volatility cascade. One multiplicatively…