Related papers: A simple microstructure return model explaining mi…
We study the estimation of moments and joint moments of microstructure noise. Estimators of arbitrary order of (joint) moments are provided, for which we establish consistency as well as central limit theorems. In particular, we provide…
The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…
We extend and test empirically the multifractal model of asset returns based on a multiplicative cascade of volatilities from large to small time scales. The multifractal description of asset fluctuations is generalized into a multivariate…
Multiple interlinked positive feedback loops shape the stimulus responses of various biochemical systems, such as the cell cycle or intracellular calcium release. Recent studies with simplified models have identified two advantages of…
The main purpose of this paper is to extend the information-based asset-pricing framework of Brody-Hughston-Macrina to a more general set-up. We include a wider class of models for market information and in contrast to the original paper,…
We present a general theory for noise-induced corrections to the angular velocity of spiral waves. Stochasticity produces two second-order effects: an instantaneous term from heterogeneity that always slows rotation, and an orbital-drift…
This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices…
In this paper, we build tests for the presence of residual noise in a model where the market microstructure noise is a known parametric function of some variables from the limit order book. The tests compare two distinct quasi-maximum…
We report on the dynamics of a model frictional system submitted to minute external perturbations. The system consists of a chain of sliders connected through elastic springs that rest on an incline. By introducing cyclic expansions and…
Observations indicate that the distributions of stock returns in financial markets usually do not conform to normal distributions, but rather exhibit characteristics of high peaks, fat tails and biases. In this work, we assume that 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.…
The slow drift (with speed $\eps$) of a parameter through a pitchfork bifurcation point, known as the dynamic pitchfork bifurcation, is characterized by a significant delay of the transition from the unstable to the stable state. We…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
The a posteriori analysis of the discretization error and the modeling error is studied for a compliance cost functional in the context of the optimization of composite elastic materials and a two-scale linearized elasticity model. A…
We address the problem of long-range memory in the financial markets. There are two conceptually different ways to reproduce power-law decay of auto-correlation function: using fractional Brownian motion as well as non-linear stochastic…
We present a novel approach to describing the microstructure of high frequency trading using two key elements. First we introduce a new notion of informed trader which we starkly contrast to current informed trader models. We describe the…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…