Related papers: Testing for Detailed Balance in a Financial Market
We further clarify the relation between detailed-balanced and complex-balanced equilibria of reversible chemical reaction networks. Our results hold for arbitrary kinetics and also for boundary equilibria. Detailed balance, complex balance,…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…
We determine the amount of information contained in a time series of price returns at a given time scale, by using a widespread tool of the information theory, namely the Shannon entropy, applied to a symbolic representation of this time…
There are two possible ways of interpreting the seemingly stochastic nature of financial markets: the Efficient Market Hypothesis (EMH) and a set of stylized facts that drive the behavior of the markets. We show evidence for some of the…
We study the price dynamics of stocks traded in the NASDAQ market by considering the statistical properties of an ensemble of stocks traded simultaneously. For each trading day of our database, we study the ensemble return distribution by…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
Financial markets typically exhibit dynamically complex properties as they undergo continuous interactions with economic and environmental factors. The Efficient Market Hypothesis indicates a rich difference in the structural complexity of…
Statistical physics of complex systems exploits network theory not only to model, but also to effectively extract information from many dynamical real-world systems. A pivotal case of study is given by financial systems: market prediction…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
We investigate the possibility of statistical evaluation of the market completeness for discrete time stock market models. It is known that the market completeness is not a robust property: small random deviations of the coefficients…
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…
A new approach to the understanding of the complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a magnitude rooted in the Kolmogorov-Chaitin theory is applied…
We compare correlations and coherent structures in nuclei and financial markets. In the nuclear physics part we review giant resonances which can be interpreted as a coherent structure embedded in chaos. With similar methods we investigate…
Markov Chain Monte Carlo (MCMC) methods are employed to sample from a given distribution of interest, whenever either the distribution does not exist in closed form, or, if it does, no efficient method to simulate an independent sample from…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
A new approach to the understanding of complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a magnitude rooted in Kolmogorov-Chaitin theory is applied to…
Detailed balance is an overly strict condition to ensure a valid Monte Carlo simulation. We show that, under fairly general assumptions, a Monte Carlo simulation need satisfy only the weaker balance condition. Not only does our proof show…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
We present a new algorithm for the statistical model checking of Markov chains with respect to unbounded temporal properties, such as reachability and full linear temporal logic. The main idea is that we monitor each simulation run on the…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…