Related papers: Asset pricing with random information flow
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Since exchange economy considerably varies in the market assets, asset prices have become an attractive research area for investigating and modeling ambiguous and uncertain information in today markets. This paper proposes a new generative…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
We introduce an interactive market setup with sequential auctions where agents receive variegated signals with a known deadline. The effects of differential information and mutual learning on the allocation of overall profit \& loss (P\&L)…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
Data assets are data commodities that have been processed, produced, priced, and traded based on actual demand. Reasonable pricing mechanism for data assets is essential for developing the data market and realizing their value. Most…
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,…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
We study a simple model of the stochastic information filtering, in a randomly organized information system. For simplest versions of the model it appears to be possible to describe the filtering dynamics in terms of the master equations.…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
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…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
In this paper, we focus on the estimation of historical volatility of asset prices from high-frequency data. Stochastic volatility models pose a major statistical challenge: since in reality historical volatility is not observable, its…
In this article we discuss the distribution of asset price movements by the market potential function. From the principle of free energy minimization we analyze two different kinds of market potentials. We obtain a U-shaped potential when…
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…
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability ${\cal P}^*$ for the stock's price at time $T$…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…