Related papers: Stochastic model of financial markets reproducing …
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
Urban housing markets, along with markets of other assets, universally exhibit periods of strong price increases followed by sharp corrections. The mechanisms generating such non-linearities are not yet well understood. We develop an…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
We study, both analytically and numerically, an ARCH-like, multiscale model of volatility, which assumes that the volatility is governed by the observed past price changes on different time scales. With a power-law distribution of time…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
This paper builds a model of high-frequency equity returns by separately modeling the dynamics of trade-time returns and trade arrivals. Our main contributions are threefold. First, we characterize the distributional behavior of…
We present examples of agent-based and stochastic models of competition and business processes in economics and finance. We start from as simple as possible models, which have microscopic, agent-based, versions and macroscopic treatment in…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
In this paper we discuss a scaling approach to business fluctuations. Our starting point consists in recognizing that concepts and methods derived from physics have allowed economists to (re)discover a set of stylized facts which have to be…
We introduce and solve a model that mimics the herding effect in financial markets when groups of agents share information. The number of agents in the model is growing and at each time step either (i) with probability $p$ an incoming agent…
We propose a simple stochastic volatility model which is analytically tractable, very easy to simulate and which captures some relevant stylized facts of financial assets, including scaling properties. In particular, the model displays a…
We show that the moments of the distribution of historic stock returns are in excellent agreement with the Heston model and not with the multiplicative model, which predicts power-law tails of volatility and stock returns. We also show that…
We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model synchronization effects, which generate large fluctuations in returns, can arise either from an…
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
We propose a model of fractal point process driven by the nonlinear stochastic differential equation. The model is adjusted to the empirical data of trading activity in financial markets. This reproduces the probability distribution…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
We give a stochastic microscopic modelling of stock markets driven by continuous double auction. If we take into account the mimetic behavior of traders, when they place limit order, our virtual markets shows the power-law tail of the…
In this paper, we provide a simple, ``generic'' interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as observed…