Related papers: Scaling symmetry, renormalization, and time series…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
We propose a simple stochastic volatility model which is analytically tractable, very easy to simulate and which captures some relevant stylized facts of financial assets, including scaling properties. In particular, the model displays a…
In this work we afford the statistical characterization of a linear Stochastic Volatility Model featuring Inverse Gamma stationary distribution for the instantaneous volatility. We detail the derivation of the moments of the return…
We introduce a multivariate stochastic volatility model for asset returns that imposes no restrictions to the structure of the volatility matrix and treats all its elements as functions of latent stochastic processes. When the number of…
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive…
Modeling the evolution of a financial index as a stochastic process is a problem awaiting a full, satisfactory solution since it was first formulated by Bachelier in 1900. Here it is shown that the scaling with time of the return…
Agents' heterogeneity is recognized as a driver mechanism for the persistence of financial volatility. We focus on the multiplicity of investment strategies' horizons, we embed this concept in a continuous time stochastic volatility…
We investigate the general problem of how to model the kinematics of stock prices without considering the dynamical causes of motion. We propose a stochastic process with long-range correlated absolute returns. We find that the model is…
This paper describes a general approach for stochastic modeling of assets returns and liability cash-flows of a typical pensions insurer. On the asset side, we model the investment returns on equities and various classes of fixed-income…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
We propose a stochastic volatility model for time series of curves. It is motivated by dynamics of intraday price curves that exhibit both between days dependence and intraday price evolution. The curves are suitably normalized to…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
Factor models characterize the joint behavior of large sets of financial assets through a smaller number of underlying drivers. We develop a network-based framework in which factors emerge naturally from the structure of interactions among…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
We investigate a generalized stochastic model with the property known as mean reversion, that is, the tendency to relax towards a historical reference level. Besides this property, the dynamics is driven by multiplicative and additive…
Multivariate probability density functions of returns are constructed in order to model the empirical behavior of returns in a financial time series. They describe the well-established deviations from the Gaussian random walk, such as an…