Related papers: Assessing multivariate predictors of financial mar…
High-frequency trading is prevalent, where automated decisions must be made quickly to take advantage of price imbalances and patterns in price action that forecast near-future movements. While many algorithms have been explored and tested,…
We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to…
We take inspiration from statistical physics to develop a novel conceptual framework for the analysis of financial markets. We model the order book dynamics as a motion of particles and define the momentum measure of the system as a way to…
Motivated by the practical challenge in monitoring the performance of a large number of algorithmic trading orders, this paper provides a methodology that leads to automatic discovery of the causes that lie behind a poor trading…
This paper introduces a flexible framework for the estimation of the conditional tail index of heavy tailed distributions. In this framework, the tail index is computed from an auxiliary linear regression model that facilitates estimation…
We introduce a minimal Agent Based Model for financial markets to understand the nature and Self-Organization of the Stylized Facts. The model is minimal in the sense that we try to identify the essential ingredients to reproduce the main…
Flexible algorithm of multicurrency trade on Forex market has been built on the grounds of non-linear stochastic wavelets (NSW) model. Probability of the loss-free trade has been evaluated. Results of the algorithm's real-time testing and…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
A plethora of static and dynamic models exist to forecast Value-at-Risk and other quantile-related metrics used in financial risk management. Industry practice tends to favour simpler, static models such as historical simulation or its…
High-dimensional multivariate spatial-temporal data arise frequently in a wide range of applications; however, there are relatively few statistical methods that can simultaneously deal with spatial, temporal and variable-wise dependencies…
We present a latent variable model for classification that provides a novel probabilistic interpretation of neural network softmax classifiers. We derive a variational objective to train the model, analogous to the evidence lower bound…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
Data can be assumed to be continuous functions defined on an infinite-dimensional space for many phenomena. However, the infinite-dimensional data might be driven by a small number of latent variables. Hence, factor models are relevant for…
This paper studies new tests for the number of latent factors in a large cross-sectional factor model with small time dimension. These tests are based on the eigenvalues of variance-covariance matrices of (possibly weighted) asset returns,…
We present results on simulations of a stock market with heterogeneous, cumulative information setup. We find a non-monotonic behaviour of traders' returns as a function of their information level. Particularly, the average informed agents…
Surveys that rely on ordinal polychotomous (Likert-like) items are widely employed to capture individual preferences because they allow respondents to express both the direction and strength of their preferences. Latent factor models…
One of the most fundamental questions in quantitative finance is the existence of continuous-time diffusion models that fit market prices of a given set of options. Traditionally, one employs a mix of intuition, theoretical and empirical…
We propose a framework for studying optimal market making policies in a limit order book (LOB). The bid-ask spread of the LOB is modelled by a Markov chain with finite values, multiple of the tick size, and subordinated by the Poisson…