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We discuss how minimal financial market models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
We study a stochastic multiplicative system composed of finite asynchronous elements to describe the wealth evolution in financial markets. We find that the wealth fluctuations or returns of this system can be described by a walk with…
Rough volatility is a well-established statistical stylised fact of financial assets. This property has lead to the design and analysis of various new rough stochastic volatility models. However, most of these developments have been carried…
There are two possible ways of interpreting the seemingly stochastic nature of financial markets: the Efficient Market Hypothesis (EMH) and a set of stylized facts that drive the behavior of the markets. We show evidence for some of the…
We measure the influence of different time-scales on the dynamics of financial market data. This is obtained by decomposing financial time series into simple oscillations associated with distinct time-scales. We propose two new time-varying…
Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered with…
In this paper, we are interested in continuous time models in which the index level induces some feedback on the dynamics of its composing stocks. More precisely, we propose a model in which the log-returns of each stock may be decomposed…
This paper explores stochastic modeling approaches to elucidate the intricate dynamics of stock prices and volatility in financial markets. Beginning with an overview of Brownian motion and its historical significance in finance, we delve…
A self-organized model with social percolation process is proposed to describe the propagations of information for different trading ways across a social system and the automatic formation of various groups within market traders. Based on…
We discuss a simple model based on the Minority Game which reproduces the main stylized facts of anomalous fluctuations in finance. We present the analytic solution of the model in the thermodynamic limit and show that stylized facts arise…
The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend.…
We show that recent stock market fluctuations are characterized by the cumulative distributions whose tails on short, minute time scales exhibit power scaling with the scaling index alpha > 3 and this index tends to increase quickly with…
Many studies have shown that there are good reasons to claim very low predictability of currency nevertheless, the deviations from true randomness exist which have potential predictive and prognostic power [J.James, Quantitative finance 3…
It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained within a simple non-Gaussian one-factor description with time…
We examine how monetary shocks spread throughout an economic model characterized by sticky prices and general equilibrium, where the pricing strategies of firms are interlinked, fostering a mutually beneficial relationship. In this dynamic…
In order to emphasize cross-correlations for fluctuations in major market places, series of up and down spins are built from financial data. Patterns frequencies are measured, and statistical tests performed. Strong cross-correlations are…
The efficiency of a modern economy depends on what we call the Value-Tracking Hypothesis: that market prices of key assets broadly track some underlying value. This can be expected if a sufficient weight of market participants are…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…