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Prices of tradables can only be expressed relative to each other at any instant of time. This fundamental fact should therefore also hold for contigent claims, i.e. tradable instruments, whose prices depend on the prices of other tradables.…
Forecasting stock returns is a challenging problem due to the highly stochastic nature of the market and the vast array of factors and events that can influence trading volume and prices. Nevertheless it has proven to be an attractive…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
We consider the valuation of contingent claims with delayed dynamics in a Black&Scholes complete market model. We find a pricing formula that can be decomposed into terms reflecting the market values of the past and the present, showing how…
Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can…
New theoretical approaches about forecasting stock markets are proposed. A mathematization of the stock market in terms of arithmetical relations is given, where some simple (non-differential, non-fractal) expressions are also suggested as…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
Modern approaches to stock pricing in quantitative finance are typically founded on the 'Black-Scholes model' and the underlying 'random walk hypothesis'. Empirical data indicate that this hypothesis works well in stable situations but, in…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
A new model for stocks markets using integer values for each stock price is presented. In contrast with previously reported models, the variables used in the model are not of binary type, but of more general integer type. It is shown how…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…
In this study, we introduce a physical model inspired by statistical physics for predicting price volatility and expected returns by leveraging Level 3 order book data. By drawing parallels between orders in the limit order book and…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
In this paper, we describe two approaches to model the behavior of stock prices. The first approach considers the underlying probability distribution of day-to-day price differences. The second approach models the movement of the price as a…
The dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other…
Linear Fisher market is one of the most fundamental economic models. The market is traditionally examined on the basis of individual's price-taking behavior. However, this assumption breaks in markets such as online advertising and…
We introduce a prototype model in an attempt to capture some aspects of market dynamics simulating a trading mechanism. The model description starts with a discrete-space, continuous-time Markov process describing arrival and movement of…