Related papers: On a Boltzmann type price formation model
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
A lattice Boltzmann model is introduced which simulates oil-water-surfactant mixtures. The model is based on a Ginzburg-Landau free energy with two scalar order parameters. Diffusive and hydrodynamic transport is included. Results are…
In this paper we present a lattice Boltzmann model for combustion and detonation. In this model the fluid behavior is described by a finite-difference lattice Boltzmann model by Gan et al. [Physica A, 2008, 387: 1721]. The chemical reaction…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
We consider a nonlinear kinetic equation of Boltzmann type which takes into account the influence of conviction during the formation of opinion in a system of agents which interact through the binary exchanges introduced in [G. Toscani,…
Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…
We propose a simple stochastic model for the dynamics of a limit order book, extending the recent work of Cont and de Larrard (2013), where the price dynamics are endogenous, resulting from market transactions. We also show that the…
A kinetic inhomogeneous Boltzmann-type equation is proposed to model the dynamics of the number of agents in a large market depending on the estimated value of an asset and the rationality of the agents. The interaction rules take into…
The goal of this work is to explain an unexpected feature of the expanding level sets of the solutions of a system where a half plane, in which reaction-diusion phenomena take place, exchanges mass with a line having a large diusion of its…
We consider a constructive model for asset price bubbles, where the market price $W$ is endogenously determined by the trading activity on the market and the fundamental price $W^F$ is exogenously given, as in the work of Jarrow, Protter…
Motivated by the numerical investigation by Aoki et al. [1], we study a rarefied gas flow between two parallel infinite plates of the same temperature governed by the Boltzmann equation with diffuse reflection boundaries, where one plate is…
A new lattice Boltzmann scheme associated with flexible specific heat ratio is proposed. The new free degree is introduced via the internal energy associated with the internal structure. The evolution equation of the distribution function…
We consider the mean-field game price formation model introduced by Gomes and Sa\'ude. In this MFG model, agents trade a commodity whose supply can be deterministic or stochastic. Agents maximize profit, taking into account current and…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
We develop an arbitrage-free random field LIBOR market model to price cross-currency derivatives. The uncertainty of the forward LIBOR rates of our cross-currency model is driven by a two time parameter random field instead of a finite…
In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…
We present an agent behavior based microscopic model for diffusion price processes. As such we provide a model not only containing a convenient framework for describing socio-economic behavior, but also a sophisticated link to price…
In Part II of this paper, we concentrate our analysis on the price dynamical model with the moving average rules developed in Part I of this paper. By decomposing the excessive demand function, we reveal that it is the interplay between…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
We consider a sequential decision-making setting where, at every round $t$, a market maker posts a bid price $B_t$ and an ask price $A_t$ to an incoming trader (the taker) with a private valuation for one unit of some asset. If the trader's…