Related papers: Optimizing a basket against the efficient market h…
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…
Summarized by the efficient market hypothesis, the idea that stock prices fully reflect all available information is always confronted with the behavior of real-world markets. While there is plenty of evidence indicating and quantifying the…
Equity basket correlation can be estimated both using the physical measure from stock prices, and also using the risk neutral measure from option prices. The difference between the two estimates motivates a so-called "dispersion strategy''.…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…
This paper studies equity basket options -- i.e., multi-dimensional derivatives whose payoffs depend on the value of a weighted sum of the underlying stocks -- and develops a new and innovative approach to ensure consistency between options…
We seek to deepen understanding of the micro-foundations of institutionalization while contributing to a sociological theory of markets by investigating the puzzle of price bubbles in financial markets. We find that such markets, despite…
Heterogeneity in efficacy is sometimes observed across baskets in basket trials. In this study, we propose a model-free clustering framework that groups baskets based on transition probabilities derived from the trajectories of treatment…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
This paper studies the time-varying structure of the equity market with respect to market capitalization. First, we analyze the distribution of the 100 largest companies' market capitalizations over time, in terms of inequality,…
The validity of the Efficient Market Hypothesis has been under severe scrutiny since several decades. However, the evidence against it is not conclusive. Artificial Neural Networks provide a model-free means to analize the prediction power…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
Energy system optimization models are becoming increasingly popular for analyzing energy markets, such as the impact of new policies or interactions between energy carriers. One key challenge of these models is the trade-off between…
We derive formulas for the performance of capital assets in continuous time from an efficient market hypothesis, with no stochastic assumptions and no assumptions about the beliefs or preferences of investors. Our efficient market…
Collective behaviours taking place in financial markets reveal strongly correlated states especially during a crisis period. A natural hypothesis is that trend reversals are also driven by mutual influences between the different stock…
We consider the problem of managing a portfolio of moving-band statistical arbitrages (MBSAs), inspired by the Markowitz optimization framework. We show how to manage a dynamic basket of MBSAs, and illustrate the method on recent historical…
We investigate the dynamics of a trust game on a mixed population where individuals with the role of buyers are forced to play against a predetermined number of sellers, whom they choose dynamically. Agents with the role of sellers are also…
We explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby…
In most professional sports, the structure of the environment is kept neutral so that scoring imbalances may be attributed to differences in team skill. It thus remains unknown what impact structural heterogeneities can have on scoring…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…