Related papers: Resilience of Volatility
This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to…
We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
A new theoretical approach to non-equilibrium statistical systems has recently been proposed by the author, a co-author and others. It is based on a variational principle which is associated with the discrepancy of a path through…
The discrete self-trapping equation (DST) represents an useful model for several properties of one-dimensional nonlinear molecular crystals. The modulational instability of DST equation is discussed from a statistical point of view,…
The exact meaning of the noise spectrum of eigenvalues of the covariance matrix is discussed. In order to better understand the possible phenomena behind the observed noise, the spectrum of eigenvalues of the covariance matrix is studied…
The local volatility model is a widely used for pricing and hedging financial derivatives. While its main appeal is its capability of reproducing any given surface of observed option prices---it provides a perfect fit---the essential…
The authors consider stochastic aspects of the stabilization problem for two and three-dimensional Oseen equations with help of feedback control defined on a part of the fluid boundary. Stochastic issues arise when inevitable unpredictable…
We investigate the general problem of how to model the kinematics of stock prices without considering the dynamical causes of motion. We propose a stochastic process with long-range correlated absolute returns. We find that the model is…
It is commonplace to encounter nonstationary data, of which the underlying generating process may change over time or across domains. The nonstationarity presents both challenges and opportunities for causal discovery. In this paper we…
We discuss the probabilistic properties of the variation based third and fourth moments of financial returns as estimators of the actual moments of the return distributions. The moment variations are defined under non-parametric assumptions…
The statistics of multi-field inflation are investigated using the stochastic approach. We analytically obtain the probability distribution function of fields with the scaling approximation by extending the previous work by Amendola. The…
Proponents of behavioral finance have identified several "puzzles" in the market that are inconsistent with rational finance theory. One such puzzle is the "excess volatility puzzle". Changes in equity prices are too large given changes in…
A Gaussian fluctuation formula is proved for linear statistics of complex random matrices in the case that the statistic is rotationally invariant. For a general linear statistic without this symmetry, Coulomb gas theory is used to predict…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of…
We consider the failure of localized control in a nonlinear spatially extended system caused by extremely small amounts of noise. It is shown that this failure occurs as a result of a nonlinear instability. Nonlinear instabilities can occur…
We propose a simple stochastic model of cascading transport in wave number space to clarify the origin of intermittent behavior of fully-developed fluid turbulence. In spite of lack of nonlinearity and viscosity the model gives non-Gaussian…
We propose a stochastic volatility model for time series of curves. It is motivated by dynamics of intraday price curves that exhibit both between days dependence and intraday price evolution. The curves are suitably normalized to…
This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…