Related papers: Drift in Transaction-Level Asset Price Models

The quantitative analysis of financial time series often reveals two distinct features that standard Gaussian frameworks fail to capture: heavy-tailed marginal distributions and the phenomenon of extreme co-movements.While extreme value…

We consider an optimal trading problem over a finite period of time during which an investor has access to both a standard exchange and a dark pool. We take the exchange to be an order-driven market and propose a continuous-time setup for…

This paper analyzes single-item continuous-review inventory models with random supplies in which the inventory dynamic between orders is described by a diffusion process, and a long-term average cost criterion is used to evaluate decisions.…

We derive generalized charge energy rate equations for organic solids and biomolecular aggregates, even when these are dynamically disordered. These equations suggest that the transport in such cases rely on both drift and diffusion…

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 propose a microstructural model for the order flow in financial markets that distinguishes between {\it core orders} and {\it reaction flow}, both modeled as Hawkes processes. This model has a natural scaling limit that reconciles a…

We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…

This study explores the prediction of high-frequency price changes using deep learning models. Although state-of-the-art methods perform well, their complexity impedes the understanding of successful predictions. We found that an…

Pure-jump processes have been increasingly popular in modeling high-frequency financial data, partially due to their versatility and flexibility. In the meantime, several statistical tests have been proposed in the literature to check the…

This paper focuses on the maximum speed at which biological evolution can occur. I derive inequalities that limit the rate of evolutionary processes driven by natural selection, mutations, or genetic drift. These \emph{rate limits} link the…

A generalization of the Drude model is studied. On the one hand, the free motion of the particles is allowed to be sub- or superdiffusive; on the other hand, the distribution of the time delay between collisions is allowed to have a long…

We conduct modeling of the price dynamics following order flow imbalance in market microstructure and apply the model to the analysis of Chinese CSI 300 Index Futures. There are three findings. The first is that the order flow imbalance is…

We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds…

We discuss the long term behaviour of trap models on the integers with asymptotically vanishing drift, providing scaling limit theorems and ageing results. Depending on the tail behaviour of the traps and the strength of the drift, we…

In the present paper we construct stock price processes with the same marginal log-normal law as that of a geometric Brownian motion and also with the same transition density (and returns' distributions) between any two instants in a given…

We study the heavy-traffic limit of the generalized switch operating under MaxWeight, without assuming that the CRP condition is satisfied and allowing for correlated arrivals. The main contribution of this paper is the steady-state mean of…

We present two models for incorporating the total effect of market microstructure noise into dynamic pricing of assets and European options. The first model is developed under a Black-Scholes-Merton, continuous-time framework. The second…

In this paper, we investigate a financial market model consisting of a risky asset, modeled as a general diffusion parameterized by a scale function and a speed measure, and a bank account process with a constant interest rate. This…

We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…

We consider the problem of utility maximization for investors with power utility functions. Building on the earlier work Larsen et al. (2016), we prove that the value of the problem is a Frechet-differentiable function of the drift of the…