Related papers: Modelling Information Flows in Financial Markets
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
We study the method for detecting relationship changes in financial markets and providing human-interpretable network visualization to support the decision-making of fund managers dealing with multi-assets. First, we construct co-occurrence…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
Modelling accurately financial price variations is an essential step underlying portfolio allocation optimization, derivative pricing and hedging, fund management and trading. The observed complex price fluctuations guide and constraint our…
We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
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…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
A micro-scale model is proposed for the evolution of the limit order book. Within this model, the flows of orders (claims) are described by doubly stochastic Poisson processes taking account of the stochastic character of intensities of bid…
We develop a model of how information flows into a market, and derive algorithms for automatically detecting and explaining relevant events. We analyze data from twenty-two "political stock markets" (i.e., betting markets on political…
Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
We investigate the financial market dynamics by introducing a heterogeneous agent-based opinion formation model. In this work, we organize the individuals in a financial market by their trading strategy, namely noise traders and…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
We assume the market price to diffuse in a hierarchical comb of barriers, the heights of which represent the importance of new information entering the market. We find fat tails with the desired exponent for the price change distribution,…
We present a dynamical model for the price evolution of financial assets. The model is based in a two level structure. In the first stage one finds an agent-based model that describes the present state of the investors' beliefs,…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…