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We present a simple model of a stock market where a random communication structure between agents gives rise to a heavy tails in the distribution of stock price variations in the form of an exponentially truncated power-law, similar to…
We have discovered 12 independent new empirical scaling laws in foreign exchange data-series that hold for close to three orders of magnitude and across 13 currency exchange rates. Our statistical analysis crucially depends on an…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
It is now well established empirically that financial price changes are distributed according to a power law, with cubic exponent. This is a fascinating regularity, as it holds for various classes of securities, on various markets, and on…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
This paper proposes a methodology to empirically validate an agent-based model (ABM) that generates artificial financial time series data comparable with real-world financial data. The approach is based on comparing the results of the ABM…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…
Oft-cited causes of mini-flash crashes include human errors, endogenous feedback loops, the nature of modern liquidity provision, fundamental value shocks, and market fragmentation. We develop a mathematical model which captures aspects of…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
A class of heterogeneous agent models is investigated where investors switch trading position whenever their motivation to do so exceeds some critical threshold. These motivations can be psychological in nature or reflect behaviour…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
Publicly traded companies are fundamental units of contemporary economies and markets and are important mechanisms through which humans interact with their environments. Understanding the general properties that underlie the processes of…
Can unstructured text data from social media help explain the drivers of large asset price fluctuations? This paper investigates how social forces affect asset prices, by using machine learning tools to extract beliefs and positions of…
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.…
In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore…
We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential,…