Related papers: Market Impact Paradoxes
We suggest that the broad distribution of time scales in financial markets could be a crucial ingredient to reproduce realistic price dynamics in stylised Agent-Based Models. We propose a fractional reaction-diffusion model for the dynamics…
We consider a model-independent pricing problem in a fixed-income market and show that it leads to a weak optimal transport problem as introduced by Gozlan et al. We use this to characterize the extremal models for the pricing of caplets on…
We address the problem of gauging the influence exerted by a given country on the global trade market from the viewpoint of complex networks. In particular, we apply the PWP method for computing indirect influences on the world trade…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
The efficiency of a modern economy depends on what we call the Value-Tracking Hypothesis: that market prices of key assets broadly track some underlying value. This can be expected if a sufficient weight of market participants are…
We investigate the use of the normalized imbalance between option volumes corresponding to positive and negative market views, as a predictor for directional price movements in the spot market. Via a nonlinear analysis, and using a…
We examine dynamic coupling and feedback effects between High Frequency Traders (HFTs) and how they can destabilize markets. We develop a general framework for modelling dynamic interaction based on recurrence relations, and use this to…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
We consider a general power market with price-sensitive consumer bids and non-convexities originating from supply (start-up and no-load costs, nonzero minimum output limits of generating units, etc.) and demand. The convex hull…
We study problems arising in real-time auction markets, common in e-commerce and computational advertising, where bidders face the problem of calculating optimal bids. We focus upon a contract management problem where a demand aggregator is…
We examine the dynamics of informational efficiency in a market with asymmetrically informed, boundedly rational traders who adaptively learn optimal strategies using simple multiarmed bandit (MAB) algorithms. The strategies available to…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
We introduce a new model in order to describe the fluctuation of tick-by-tick financial time series. Our model, based on marked point process, allows us to incorporate in a unique process the duration of the transaction and the…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
The composition of natural liquidity has been changing over time. An analysis of intraday volumes for the S&P500 constituent stocks illustrates that (i) volume surprises, i.e., deviations from their respective forecasts, are correlated…
Financial markets are a source of non-stationary multidimensional time series which has been drawing attention for decades. Each financial instrument has its specific changing-over-time properties, making its analysis a complex task. Hence,…
In this paper we propose a new stochastic model based on a generalization of semi-Markov chains to study the high frequency price dynamics of traded stocks. We assume that the financial returns are described by a weighted indexed…
In standard Walrasian auctions, the price of a good is defined as the point where the supply and demand curves intersect. Since both curves are generically regular, the response to small perturbations is linearly small. However, a crucial…
We examine the relationship between trading volumes, number of transactions, and volatility using daily stock data of the Tokyo Stock Exchange. Following the mixture of distributions hypothesis, we use trading volumes and the number of…
In complex systems, many different parts interact in non-obvious ways. Traditional research focuses on a few or a single aspect of the problem so as to analyze it with the tools available. To get a better insight of phenomena that emerge…