Related papers: On return-volatility correlation in financial dyna…
We study the price dynamics of stocks traded in a financial market by considering the statistical properties both of a single time series and of an ensemble of stocks traded simultaneously. We use the $n$ stocks traded in the New York Stock…
Studying Binomial and Gaussian return dynamics in discrete time, we show how excess volatility can be traded to create growth. We test our results on real world data to confirm the observed model phenomena while also highlighting implicit…
Time-varying volatility is an inherent feature of most economic time-series, which causes standard correlation estimators to be inconsistent. The quadrant correlation estimator is consistent but very inefficient. We propose a novel…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
The dynamic network of relationships among corporations underlies cascading economic failures including the current economic crisis, and can be inferred from correlations in market value fluctuations. We analyze the time dependence of the…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
Based on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
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…
This paper attempts to find a relationship between agents' risk aversion and inequality of incomes. Specifically, a model is proposed for the evolution in time of surplus/deficit distribution, and the long-time distributions are…
In an efficient stock market, the returns and their time-dependent volatility are often jointly modeled by stochastic volatility models (SVMs). Over the last few decades several SVMs have been proposed to adequately capture the defining…
Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…
This paper develops a dynamic factor model in which common level and volatility factors evolve jointly, allowing conditional means and variances to interact endogenously within a large-information setting. The joint evolution of these…
Volatility is a key measure of risk in financial analysis. The high volatility of one financial asset today could affect the volatility of another asset tomorrow. These lagged effects among volatilities - which we call volatility spillovers…
We show that scale-scale correlations are a generic feature of slow-roll inflation theories. These correlations result from the long-time tails characteristic of the time dependent correlations because the long wavelength density…
Detailed study of the financial empirical correlation matrix of the 30 companies comprised by DAX within the period of the last 11 years, using the time-window of 30 trading days, is presented. This allows to clearly identify a nontrivial…
In this paper we propose a new stochastic model based on a generalization of semi-Markov chains to study the high frequency price dynamics of traded stocks. We assume that the financial returns are described by a weighted indexed…
We examine dynamic coupling and feedback effects between High Frequency Traders (HFTs) and how they can destabilize markets. We develop a general framework for modelling dynamic interaction based on recurrence relations, and use this to…
Analogies between the price dynamics in the foreign exchange market and 3-dimensional fully developed turbulence were recently presented in Nature vol. 381, 767-769 (1996). Independently, we have carried out a study comparing the parallel…
Response delay is an inherent and essential part of human actions. In the context of human balance control, the response delay is traditionally modeled using the formalism of delay-differential equations, which adopts the approximation of…