Related papers: Semi Markov model for market microstructure
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
In this paper we study a risk-minimizing hedging problem for a semimartingale incomplete financial market where d+1 assets are traded continuously and whose price is expressed in units of the num\'{e}raire portfolio. According to the…
We consider asset price models whose dynamics are described by linear functions of the (time extended) signature of a primary underlying process, which can range from a (market-inferred) Brownian motion to a general multidimensional…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
We consider a system of $N$ neurons, each spiking randomly with rate depending on its membrane potential. When a neuron spikes, its potential is reset to $0$ and all other neurons receive an additional amount $h/N$ of potential, where $ h >…
R. Cont and A. de Larrard (SIAM J. Finan. Math, 2013) introduced a tractable stochastic model for the dynamics of a limit order book, computing various quantities of interest such as the probability of a price increase or the diffusion…
We consider a finite state discrete time process X. Without loss of generality the finite state space can be identified with the set of unit vectors {e1, e2, . . . , eN} with ei = (0, . . . , 0, 1, 0, . . . , 0)0 2 RN. For a Markov chain…
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…
At high levels, the asymptotic distribution of a stationary, regularly varying Markov chain is conveniently given by its tail process. The latter takes the form of a geometric random walk, the increment distribution depending on the sign of…
In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token.…
Financial markets exhibit alternating periods of rising and falling prices. Stock traders seeking to make profitable investment decisions have to account for those trends, where the goal is to accurately predict switches from bullish…
In this paper, we present a new bivariate model for the joint description of the Bitcoin prices and the media attention to Bitcoin. Our model is based on the class of the L\'evy processes and is able to realistically reproduce the jump-type…
This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
Prediction-market price moves are widely treated as informationally equivalent: a price jump is read the same way regardless of whether it reflects durable Bayesian updating, transient liquidity pressure, strategic position adjustment, or…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
We propose two specifications of a real-time mixed-frequency semi-structural time series model for evaluating the output potential, output gap, Phillips curve, and Okun's law for the US. The baseline model uses minimal theory-based…
We propose a new approach for analyzing price fluctuations in their strongly correlated regime ranging from minutes to months. This is done by employing a self-similarity assumption for the magnitude of coarse-grained price fluctuation or…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…