Related papers: Liquidity crises on different time scales
We consider the limiting behavior of fluctuations of small noise diffusions with multiple scales around their homogenized deterministic limit. We allow full dependence of the coefficients on the slow and fast motion. These processes arise…
On the basis of a lattice gas model and the convolution formula with cell construction scheme, we demonstrate that intermittency in the rapidity-space with respect to the scaled moments comes from a phase transition between ordered phase…
We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple.…
The large variability of renewable power sources is a central challenge in the transition to a sustainable energy system. Electricity markets are central for the coordination of electric power generation. These markets rely evermore on…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
We present an extended version of the recently proposed "LLOB" model for the dynamics of latent liquidity in financial markets. By allowing for finite cancellation and deposition rates within a continuous reaction-diffusion setup, we…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
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 propose that the minimal requirements for a model of stock market price fluctuations should comprise time asymmetry, robustness with respect to connectivity between agents, ``bounded rationality'' and a probabilistic description. We also…
We introduce a practical, interactive simulator of the limit order book for large-tick assets, designed to produce realistic execution, costs, and P&L. The book state is projected onto a tractable representation based on spread and volume…
In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and…
We study optimal liquidation strategies under partial information for a single asset within a finite time horizon. We propose a model tailored for high-frequency trading, capturing price formation driven solely by order flow through…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
We propose a new model of the liquidity driven banking system focusing on overnight interbank loans. This significant branch of the interbank market is commonly neglected in the banking system modeling and systemic risk analysis. We…
Finite size fluctuations are a crucial ingredient in kinetic theory of long-range interacting collisionless systems. In this Letter, we introduce a phenomenological theory which predicts an anomalous scaling close to marginal stability for…
We propose a non linear Langevin equation as a model for stock market fluctuations and crashes. This equation is based on an identification of the different processes influencing the demand and supply, and their mathematical transcription.…
Motivated by empirical observations on the interplay of trends and reversion, a lattice gas model of financial markets is presented. The shares of an asset are modeled by gas molecules that are distributed across a hidden social network of…
For the class of noisy time-delay linear consensus networks, we obtain explicit formulas for risk of large fluctuations of a scalar observable as a function of Laplacian spectrum and its eigenvectors. It is shown that there is an intrinsic…
This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
This paper presents a new interacting particle system and uses it as a spin model for financial market microstructure. The asymptotic analysis of this stochastic process exhibits a lower bound to the contemporaneous measurement of price and…