Related papers: Volatility made observable at last
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 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…
Based on law of large numbers and central limit theorem under nonlinear expectation, we introduce a new method of using G-normal distribution to measure financial risks. Applying max-mean estimators and small windows method, we establish…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We examine the out-of-equilibrium phase reported by Plerou {\it et. al.} in Nature, {\bf 421}, 130 (2003) using the data of the New York stock market (NYSE) between the years 2001 --2002. We find that the observed two phase phenomenon is an…
Thanks to the nonstandard formalization of fast oscillating functions, due to P. Cartier and Y. Perrin, an appropriate mathematical framework is derived for new non-asymptotic estimation techniques, which do not necessitate any statistical…
There is by now a large consensus in modern monetary policy. This consensus has been built upon a dynamic general equilibrium model of optimal monetary policy as developed by, e.g., Goodfriend and King (1997), Clarida et al. (1999),…
The presence of non linear instruments is responsible for the emergence of non Gaussian features in the price changes distribution of realistic portfolios, even for Normally distributed risk factors. This is especially true for the…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
In the present paper, we first revisit the volatility estimation approach proposed by N. Kunitomo and S. Sato, and second, we show that the volatility estimator proposed by P. Malliavin and M.E. Mancino can be understood in a unified way by…
Volatility asymmetry is a hot topic in high-frequency financial market. In this paper, we propose a new econometric model, which could describe volatility asymmetry based on high-frequency historical data and low-frequency historical data.…
In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
Standard quantitative models of the stock market predict a log-normal distribution for stock returns (Bachelier 1900, Osborne 1959), but it is recognised (Fama 1965) that empirical data, in comparison with a Gaussian, exhibit leptokurtosis…
Norms of Persistent Homology introduced in topological data analysis are seen as indicators of system instability, analogous to the changing predictability that is captured in financial market uncertainty indexes. This paper demonstrates…
We discuss the time evolution of quotations of stocks and commodities and show that corrections to the orthodox Bachelier model inspired by quantum mechanical time evolution of particles may be important. Our analysis shows that traders…
We consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Lo\`{e}ve expansion for the…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
We consider a mean-reverting stochastic volatility model which satisfies some relevant stylized facts of financial markets. We introduce an algorithm for the detection of peaks in the volatility profile, that we apply to the time series of…