Related papers: Self-Financing Trading and the Ito-Doeblin Lemma
This paper investigates the equilibrium interactions between trading targets and private information in a multi-period Kyle (1985) market. There are two investors who each follow dynamic trading strategies: A strategic portfolio rebalancer…
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves…
We study the general model of self-financing trading strategies in illiquid markets introduced by Schoenbucher and Wilmott, 2000. A hedging strategy in the framework of this model satisfies a nonlinear partial differential equation (PDE)…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
Technical trading represents a class of investment strategies for Financial Markets based on the analysis of trends and recurrent patterns of price time series. According standard economical theories these strategies should not be used…
This paper describes an approach to economics that is inspired by quantum computing, and is motivated by the need to develop a consistent quantum mathematical framework for economics. The traditional neoclassical approach assumes that…
Econophysics has developed as a research field that applies the formalism of Statistical Mechanics and Quantum Mechanics to address Economics and Finance problems. The branch of Econophysics that applies of Quantum Theory to Economics and…
A first attempt at obtaining market--directional information from a non--stationary solution of the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. We demonstrate…
This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…
In 1951 Robbins and Monro published the seminal article on stochastic approximation and made a specific reference to its application to the "estimation of a quantal using response, nonresponse data." Since the 1990s, statistical methodology…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
Financial markets have developed a lot of strategies to control risks induced by market fluctuations. Mathematics has emerged as the leading discipline to address fundamental questions in finance as asset pricing model and hedging…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents…
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…
Traders and investors involved in an option contract having the underlying stock in range bound are likely to lose their initial investment. Timing in buying an option contract is of capital importance. In a recent article [1] the…
The algorithmic trading comes from digitalisation of the processing of trading assets on financial markets. Since 1980 the computerization of the stock market offers real time processing of financial information. This technological…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
The research presented in this work is motivated by recent papers by Brigo et al. (2011), Burgard and Kjaer (2009), Cr\'epey (2012), Fujii and Takahashi (2010), Piterbarg (2010) and Pallavicini et al. (2012). Our goal is to provide a sound…
Quantum money allows a bank to mint quantum money states that can later be verified and cannot be forged. Usually, this requires a quantum communication infrastructure to transfer quantum states between the user and the bank. Gavinsky (CCC…