Related papers: Measuring market liquidity: An introductory survey
Active management is a term that has many meanings and we have found the defining characteristics needed for success as an "active manager" elusive within the literature. In this paper we offer a set of criteria that defines an active…
This paper delves into the dynamics of asset pricing within Bachelier market model, elucidating the representation of risky asset price dynamics and the definition of riskless assets.
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
Inheritances, divorces or liquidations of companies require common assets to be divided among the entitled parties. Legal methods usually consider the market value of goods, while fair division theory takes into account the parties'…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
Fixed income markets share many features with the equity markets. However there are significant differences as well and many attempts have been done in the past to develop specific tools which describe (and possibly forecasts) the behavior…
The collective phenomena of a liquid market is characterized in terms of a particle system scenario. This physical analogy enables us to disentangle intrinsic features from purely stochastic ones. The latter are the result of environmental…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple.…
Over the past few years, the futures market has been successfully developing in the North-West region. Futures markets are one of the most effective and liquid-visible trading mechanisms. A large number of buyers are forced to compete with…
Market Microstructure is the investigation of the process and protocols that govern the exchange of assets with the objective of reducing frictions that can impede the transfer. In financial markets, where there is an abundance of recorded…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
The paper discusses various practical consequences of treating economics and finance as an inherently dynamic and chaotic system. On the theoretical side this looks at the general applicability of the market-making pricing approach to…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…
We study the concept of financial bubble in a market model endowed with a set of probability measures, typically mutually singular to each other. In this setting we introduce the notions of robust bubble and robust fundamental value in a…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…