Related papers: The $500.00 AAPL close: Manipulation or hedging? A…
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…
We provide direct evidence of market manipulation at the beginning of the financial crisis in November 2007. The type of manipulation, a "bear raid," would have been prevented by a regulation that was repealed by the Securities and Exchange…
The possibility that price dynamics is affected by its distance from a moving average has been recently introduced as new statistical tool. The purpose is to identify the tendency of the price dynamics to be attractive or repulsive with…
In wholesale electricity markets, prices fluctuate widely from hour to hour and electricity generators price-hedge their output using longer-term contracts, such as monthly base futures. Consequently, the incentives they face to drive up…
We consider the problem of fair pricing and hedging under small perturbations of the num\'eraire. We show that for replicable claims, the change of num\'eraire affects neither the fair price nor the hedging strategy. For non-replicable…
Price gap, defined as the logarithmic price difference between the first two occupied price levels on the same side of a limit order book (LOB), is a key determinant of market depth, which is one of the dimensions of liquidity. However, the…
Margin trading in which investors purchase shares with money borrowed from brokers is blamed to be a major cause of the 2015 Chinese stock market crash. We propose a cascading failure model and examine how an increase in margin trading…
Buying or selling assets leads to transaction costs for the investor. On one hand, it is well know to all market practionaires that the transaction costs are positive on average and present therefore systematic loss. On the other hand, for…
Human decision making by professionals trading daily in the stock market can be a daunting task. It includes decisions on whether to keep on investing or to exit a market subject to huge price swings, and how to price in news or rumors…
Evidence is offered for log-periodic (in time) fluctuations in the S&P 500 stock index during the three years prior to the October 27, 1997 "correction". These fluctuations were expected on the basis of a discretely scale invariant rupture…
Price-mediated contagion occurs when a positive feedback loop develops following a drop in asset prices which forces banks and other financial institutions to sell their holdings. Prior studies of such events fix the level of market…
We discuss - in what is intended to be a pedagogical fashion - a criterion, which is a lower bound on a certain ratio, for when a stock (or a similar instrument) is not a good investment in the long term, which can happen even if the…
Can unstructured text data from social media help explain the drivers of large asset price fluctuations? This paper investigates how social forces affect asset prices, by using machine learning tools to extract beliefs and positions of…
This study analyses the duration dependence of events that trigger volatility persistence in stock markets. Such events, in our context, are monthly spells of contiguous price decline or negative returns for the S&P500 stock market index…
The price fluctuations in the financial markets are the result of the individual operations by many individual investors. However for many decades the finacial theory did not use directly this "microscopic representation". The difficulties…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
The sporadic large fluctuations are seen in the stock market due to changes in fundamental parameters, technical setups, and external factors. These large fluctuations are termed as Extreme Events (EE). The EEs may be positive or negative…
We consider the hedging problem where a futures position can be automatically liquidated by the exchange without notice. We derive a semi-closed form for an optimal hedging strategy with dual objectives - to minimise both the variance of…
The standard Black-Scholes theory of option pricing is extended to cope with underlying return fluctuations described by general probability distributions. A Langevin process and its related Fokker-Planck equation are devised to model the…