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This paper investigates the financial economics of simple periodic systems. Well-established financial procedures appear to be complicated, and lead to partially biased results. Probability theory is applied, and the focus is on the…
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary…
In the field of quantitative finance, volatility models, such as ARCH, GARCH, FIGARCH, SV, EWMA, play the key role in risk and portfolio management. Meanwhile, factor investing is more and more famous since mid of 20 century. CAPM, Fama…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
We present the unified market-based description of returns and variances of the trades with shares of a particular security, of the trades with shares of all securities in the market, and of the trades with the market portfolio. We consider…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
Crowding is most likely an important factor in the deterioration of strategy performance, the increase of trading costs and the development of systemic risk. We study the imprints of \emph{crowding} on both anonymous market data and a large…
The aim of this paper is to identify the determinants of international stock markets integration. Intuitively we selected a great number of factors linked to financial integration. Then, we developed an international asset-pricing model…
This paper develops new mathematical techniques to identify temporal shifts among a collection of US equities partitioned into a new and more detailed set of market sectors. Although conceptually related, our three analyses reveal distinct…
We study a stochastic multiplicative system composed of finite asynchronous elements to describe the wealth evolution in financial markets. We find that the wealth fluctuations or returns of this system can be described by a walk with…
In line with the recent policy discussion on the use of macroprudential measures to respond to cross-border risks arising from capital flows, this paper tries to quantify to what extent macroprudential policies (MPPs) have been able to…
Universal features in stock markets and their derivative markets are studied by means of probability distributions in internal rates of return on buy and sell transaction pairs. Unlike the stylized facts in log normalized returns, the…
In recent years, the economic policy of privatization, which is defined as the transfer of property or responsibility from public sector to private sector, is one of the global phenomenon that increases use of markets to allocate resources.…
This paper aims to develop new mathematical and computational tools for modeling the distribution of portfolio returns across portfolios. We establish relevant mathematical formulas and propose efficient algorithms, drawing upon powerful…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
This paper introduces a novel approach to financial risk analysis that does not rely on traditional price and market data, instead using market news to model assets as distributions over a metric space of risk factors. By representing asset…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…
This paper addresses the portfolio selection problem for nonlinear law-dependent preferences in continuous time, which inherently exhibit time inconsistency. Employing the method of stochastic maximum principle, we establish verification…
This paper provides a general method to directly translate a classical economic framework with a large number of agents into a field-formalism model. This type of formalism allows the analytical treatment of economic models with an…
Market timing is an investment technique that tries to continuously switch investment into assets forecast to have better returns. What is the likelihood of having a successful market timing strategy? With an emphasis on modeling…