Related papers: A simple microstructure return model explaining mi…
A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…
Corporate earnings announcements unpack large bundles of public information that should, in efficient markets, trigger jumps in stock prices. Testing this implication is difficult in practice, as it requires noisy high-frequency data from…
We present a simple dynamical model of stock index returns which is grounded on the ability of the Cyclically Adjusted Price Earning (CAPE) valuation ratio devised by Robert Shiller to predict long-horizon performances of the market. More…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
Positive feedback and cooperativity in the regulation of gene expression are generally considered to be necessary for obtaining bistable expression states. Recently, a novel mechanism of bistability termed emergent bistability has been…
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…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
We investigate the emergence of a structure in the correlation matrix of assets' returns as the time-horizon over which returns are computed increases from the minutes to the daily scale. We analyze data from different stock markets (New…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
In this paper, we use the generalized Hurst exponent approach to study the multi- scaling behavior of different financial time series. We show that this approach is robust and powerful in detecting different types of multiscaling. We…
Twenty five years ago, several authors proposed to describe the forward interest rate curve (FRC) as an elastic string along which idiosyncratic shocks propagate, accounting for the peculiar structure of the return correlation across…
It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained within a simple non-Gaussian one-factor description with time…
The effect of a change of noise amplitudes in overdamped diffusive systems is linked to their unperturbed behavior by means of a nonequilibrium fluctuation-response relation. This formula holds also for systems with state-independent…
Understanding the micro-dynamics of asset prices in modern electronic order books is crucial for investors and regulators. In this paper, we use an order by order Eurostoxx database spanning over 3 years to analyze the joint dynamics of…
In this work, we study the problem of learning the volatility under market microstructure noise. Specifically, we consider noisy discrete time observations from a stochastic differential equation and develop a novel computational method to…
A technique for on-line estimation of spot volatility for high-frequency data is developed. The algorithm works directly on the transaction data and updates the volatility estimate immediately after the occurrence of a new transaction.…
We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model synchronization effects, which generate large fluctuations in returns, can arise either from an…
Correlation between microstructure noise and latent financial logarithmic returns is an empirically relevant phenomenon with sound theoretical justification. With few notable exceptions, all integrated variance estimators proposed in the…