Related papers: The Minimal Model of Financial Complexity

We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…

We propose a simple model for the behaviour of longterm investors on a stock market, consisting of three particles, which represent the current price of the stock and the opinion of the buyers, respectively sellers, about the right trading…

The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…

We present here a topological characterization of the minimal spanning tree that can be obtained by considering the price return correlations of stocks traded in a financial market. We compare the minimal spanning tree obtained from a large…

We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in…

Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…

The \$-Game was recently introduced as an extension of the Minority Game. In this paper we compare this model with the well know Minority Game and the Majority Game models. Due to the inter-temporal nature of the market payoff, we introduce…

We describe how the market-based average and volatility of the "actual" return, which the investors gain within their market sales, depend on the statistical moments, volatilities, and correlations of the current and past market trade…

We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…

The minority game (MG) model introduced recently provides promising insights into the understanding of the evolution of prices, indices and rates in the financial markets. In this paper we perform a time series analysis of the model…

In the econometrics of financial time series, it is customary to take some parametric model for the data, and then estimate the parameters from historical data. This approach suffers from several problems. Firstly, how is estimation error…

We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…

Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…

We define the complexity of a continuous-time linear system to be the minimum number of bits required to describe its forward increments to a desired level of fidelity, and compute this quantity using the rate distortion function of a…

We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…

This note continues investigation of randomness-type properties emerging in idealized financial markets with continuous price processes. It is shown, without making any probabilistic assumptions, that the strong variation exponent of…

We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…

We develop a behavioral model for liquidity and volatility based on empirical regularities in trading order flow in the London Stock Exchange. This can be viewed as a very simple agent based model in which all components of the model are…

In this paper we continue our descriptions of stock markets in terms of some non abelian operators which are used to describe the portfolio of the various traders and other {\em observable} quantities. After a first prototype model with…

We proposed a model of interacting market agents based on the Ising spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of the system magnetization. The model reproduces…