Related papers: Semi Markov model for market microstructure
We describe a simple method that can be used to sample the rare fluctuations of discrete-time Markov chains. We focus on the case of Markov chains with well-defined steady-state measures, and derive expressions for the large-deviation rate…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
Semi-Markov models are widely used for survival analysis and reliability analysis. In general, there are two competing parameterizations and each entails its own interpretation and inference properties. On the one hand, a semi-Markov…
Based on the tick-by-tick stock prices from the German and American stock markets, we study the statistical properties of the distribution of the individual stocks and the index returns in highly collective and noisy intervals of trading,…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient…
We propose a new estimator for the spot covariance matrix of a multi-dimensional continuous semi-martingale log asset price process which is subject to noise and non-synchronous observations. The estimator is constructed based on a local…
In this paper we introduce a simple continuous-time asset pricing framework, based on general multi-dimensional diffusion processes, that combines semi-analytic pricing with a nonlinear specification for the market price of risk. Our…
We endorse the idea, suggested in recent literature, that BitCoin prices are influenced by sentiment and confidence about the underlying technology; as a consequence, an excitement about the BitCoin system may propagate to BitCoin prices…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the…
This paper describes simulations and analysis of flash crash scenarios in an agent-based modelling framework. We design, implement, and assess a novel high-frequency agent-based financial market simulator that generates realistic…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
As the dynamic structure of the financial markets is subject to dramatic changes, a model capable of providing consistently accurate volatility estimates must not make strong assumptions on how prices change over time. Most volatility…
We present a simple Markov model of spiking neural dynamics that can be analytically solved to characterize the stochastic dynamics of a finite-size spiking neural network. We give closed-form estimates for the equilibrium distribution,…
This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
It has been understood that the "local" existence of the Markowitz' optimal portfolio or the solution to the local-risk minimization problem is guaranteed by some specific mathematical structures on the underlying assets price processes…
This paper is concerned with asymptotic behavior of a variety of functionals of increments of continuous semimartingales. Sampling times are assumed to follow a rather general discretization scheme. If an underlying semimartingale is…
Semi-Markov processes play an important role in the effective description of partially accessible systems in stochastic thermodynamics. They occur, for instance, in coarse-graining procedures such as state lumping and when analyzing waiting…
We proposed a market simulation model (micro model) which displays multifractality and reproduces many important stylized facts of speculative markets. From this model we analytically extracted the MMAR model (Multifractal Model of Asset…
A model is proposed for Bitcoin prices that takes into account market attention. Market attention, modeled by a mean-reverting Cox-Ingersoll-Ross processes, affects the volatility of Bitcoin returns, with some delay. The model is affine and…