Related papers: Modeling high-frequency financial data by pure jum…
Evaluation of default correlation is an important task in credit risk analysis. In many practical situations, it concerns the joint defaults of several correlated firms, the task that is reducible to a first passage time (FPT) problem. This…
We evaluate the significance of a recently proposed bivariate jump-diffusion model for a data-driven characterization of interactions between complex dynamical systems. For various coupled and non-coupled jump-diffusion processes, we find…
We consider statistical inference for a class of dynamic mixed-effect models described by stochastic differential equations whose drift and diffusion coefficients simultaneously depend on fixed- and random-effect parameters. Assuming that…
Organizations use cash management models to control balances to both avoid overdrafts and obtain a profit from short-term investments. Most management models are based on control bounds which are derived from the assumption of a particular…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
In this paper, we provide a simple, ``generic'' interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as observed…
Path integral techniques for the pricing of financial options are mostly based on models that can be recast in terms of a Fokker-Planck differential equation and that, consequently, neglect jumps and only describe drift and diffusion. We…
We develop a nonparametric test for deciding whether volatility of an asset follows a standard semimartingale process, with paths of finite quadratic variation, or a rough process with paths of infinite quadratic variation. The test…
A point process for event arrivals in high frequency trading is presented. The intensity is the product of a Hawkes process and high dimensional functions of covariates derived from the order book. Conditions for stationarity of the process…
We propose how to quantify high-frequency market sentiment using high-frequency news from NASDAQ news platform and support vector machine classifiers. News arrive at markets randomly and the resulting news sentiment behaves like a…
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…
We solve the first-passage problem for the Heston random diffusion model. We obtain exact analytical expressions for the survival and hitting probabilities to a given level of return. We study several asymptotic behaviors and obtain…
Central Banks interventions are frequent in response to exogenous events with direct implications on financial market volatility. In this paper, we introduce the Asymmetric Jump Multiplicative Error Model (AJM), which accounts for a…
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of…
Statistical inference for discretely observed jump-diffusion processes is a complex problem which motivates new methodological challenges. Thus existing approaches invariably resort to time-discretisations which inevitably lead to…
We introduce and study the notion of sure profit via flash strategy, consisting of a high-frequency limit of buy-and-hold trading strategies. In a fully general setting, without imposing any semimartingale restriction, we prove that there…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
This paper proposes an enhanced approach to modeling and forecasting volatility using high frequency data. Using a forecasting model based on Realized GARCH with multiple time-frequency decomposed realized volatility measures, we study the…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…