Related papers: Modelling Information Flows in Financial Markets
In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author…
The increasing richness in volume, and especially types of data in the financial domain provides unprecedented opportunities to understand the stock market more comprehensively and makes the price prediction more accurate than before.…
We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses a market maker based method of price…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
We investigate high frequency price dynamics in foreign exchange market using data from Reuters information system (the dataset has been provided to us by Ols en & Associates). In our analysis we show that a na\"ive approach to the…
We extend the now classic structural credit modeling approach of Black and Cox to a class of "two-factor" models that unify equity securities such as options written on the stock price, and credit products like bonds and credit default…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
A unified analytical pricing framework with involvement of the shot noise random process has been introduced and elaborated. Two exactly solvable new models have been developed. The first model has been designed to value options. It is…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
Most of parameters used to describe states and dynamics of financial market depend on proportions of the appropriate variables rather than on their actual values. Therefore, projective geometry seems to be the correct language to describe…
We study a simple model of an asset market with informed and non-informed agents. In the absence of non-informed agents, the market becomes information efficient when the number of traders with different private information is large enough.…
A pricing formula for discount bonds, based on the consideration of the market perception of future liquidity risk, is established. An information-based model for liquidity is then introduced, which is used to obtain an expression for the…
We present a novel microscopic stock market model consisting of a large number of random agents modeling traders in a market. Each agent is characterized by a set of parameters that serve to make iterated predictions of two successive…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of…