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In this paper we perform robustness and sensitivity analysis of several continuous-time stochastic volatility (SV) models with respect to the process of market calibration. The analyses should validate the hypothesis on importance of the…
A liquidity measure based on consideration and price range is proposed. Initially defined for daily data, Liquidity Index (LIX) can also be estimated via intraday data by using a time scaling mechanism. The link between LIX and the…
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…
Introducing an algebraic framework for modeling limit order books (LOBs) with tools from physics and stochastic processes, our proposed framework captures the creation and annihilation of orders, order matching, and the time evolution of…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
We develop a framework to study the role of variability in transport across a streamline of a reference flow. Two complementary schemes are presented: a graphical approach for individual cases, and an analytical approach for general…
In reliability theory and survival analysis, the residual entropy is known as a measure suitable to describe the dynamic information content in stochastic systems conditional on survival. Aiming to analyze the variability of such…
Credit risk assessment is a crucial aspect of financial decision-making, enabling institutions to predict the likelihood of default and make informed lending decisions. Two prominent methodologies in credit risk modeling are logistic…
We propose model-free (nonparametric) estimators of the volatility of volatility and leverage effect using high-frequency observations of short-dated options. At each point in time, we integrate available options into estimates of the…
A point process model for order flows in limit order books is proposed, in which the conditional intensity is the product of a Hawkes component and a state-dependent factor. In the LOB context, state observations may include the observed…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
This paper formulates dynamic density functions, based upon skewed-t and similar representations, to model and forecast electricity price spreads between different hours of the day. This supports an optimal day ahead storage and discharge…
We develop a liquidity-sensitive multivariate volatility framework to improve the estimation of time-varying covariance structures under market frictions. We introduce two novel portfolio-level liquidity measures, liquidity jump and…
Pooled logistic regression models are commonly applied in survival analysis. However, the standard implementation can be computationally demanding, which is further exacerbated when using the nonparametric bootstrap for inference. To ease…
We introduce a new class of continuous-time models of the stochastic volatility of asset prices. The models can simultaneously incorporate roughness and slowly decaying autocorrelations, including proper long memory, which are two stylized…
The distribution of liquidity within the limit order book is essential for the impact of market orders on the stock price and the emergence of price shocks. Limit orders are characterized by stylized facts: The number of inserted limit…
Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus…
An ability to postpone one's execution without penalty provides an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution…
This work considers stochastic operators in general inner-product spaces, and in particular, systems with stochastically time-varying input delays of a known probability distribution. Stochastic dissipativity and stability are defined from…
A survival model is derived from the exponential function using the concept of fractional differentiation. The hazard function of the proposed model generates various shapes of curves including increasing, increasing-constant-increasing,…