Related papers: Statistical properties of derivatives: a journey i…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
A simple quantum model explains the Levy-unstable distributions for individual stock returns observed by ref.[1]. The probability density function of the returns is written as the squared modulus of an amplitude. For short time intervals…
We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…
Recently the statistical characterizations of financial markets based on physics concepts and methods attract considerable attentions. We used two possible procedures of analyzing multifractal properties of a time series. The first one uses…
We empirically analyze the scaling properties of daily Foreign Exchange rates, Stock Market indices and Bond futures across different financial markets. We study the scaling behaviour of the time series by using a generalized Hurst exponent…
The third moment variation of a financial asset return process is defined by the quadratic covariation between the return and square return processes. The skew and fat tail risk of an underlying asset can be hedged using a third moment…
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 the local volatility function in the Foreign Exchange market where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and…
Employing a recent technique which allows the representation of nonstationary data by means of a juxtaposition of locally stationary patches of different length, we introduce a comprehensive analysis of the key observables in a financial…
One stylized feature of financial volatility impacting the modeling process is long memory. This paper examines long memory for alternative risk measures, observed absolute and squared returns for Daily REITs and compares the findings for a…
In this article, we analyze two modeling approaches for the pricing of derivative contracts on a commodity index. The first one is a microscopic approach, where the components of the index are modeled individually, and the index price is…
Statistical and multiscaling characteristics of WTI Crude Oil prices expressed in US dollar in relation to the most traded currencies as well as to gold futures and to the E-mini S$\&$P500 futures prices on 5 min intra-day recordings in the…
Report presents analysis of empirical distribution of future returns of bitcoin (BTC) from BTUSD inverse option prices. Logistic pdf is chosen as underlying distribution to fit option prices. The result is satisfactory and suggests that…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
We introduce a multi-factor stochastic volatility model for commodities that incorporates seasonality and the Samuelson effect. Conditions on the seasonal term under which the corresponding volatility factor is well-defined are given, and…
The study of long-horizon returns has received a great deal of attention in recent years (see, for example, Boudoukh, Richardson, and Whitelaw (2008), Neuberger (2012) and Lee (2013), Fama and French (2018)). While most of the discussions…
Financial markets exhibit an apparent paradox: while directional price movements remain largely unpredictable--consistent with weak-form efficiency--the magnitude of price changes displays systematic structure. Here we demonstrate that…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
We present cross and time series analysis of price fluctuations in the U.S. Treasury fixed income market. By means of techniques borrowed from statistical physics we show that the correlation among bonds depends strongly on the maturity and…
We show that the moments of the distribution of historic stock returns are in excellent agreement with the Heston model and not with the multiplicative model, which predicts power-law tails of volatility and stock returns. We also show that…