Related papers: Currency target zone modeling: An interplay betwee…
This paper proposes a target zones exchange rate model with a terminal condition of entering a currency zone. It is assumed that the exchange rate is a function of the fundamental and time. Another essential assumptions of the model is that…
Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads…
We consider a central bank strategy for maintaining a two-sided currency target zone, in which an exchange rate of two currencies is forced to stay between two thresholds. To keep the exchange rate from breaking the prescribed barriers, the…
An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an…
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…
This work studies the symmetry between colloidal dynamics and the dynamics of the Euro--US Dollar currency exchange market (EURUSD). We consider the EURUSD price in the time range between 2001 and 2015, where we find significant qualitative…
In this paper we test the random walk hypothesis on the high frequency dataset of the bid--ask Deutschemark/US dollar exchange rate quotes registered by the inter-bank Reuters network over the period October 1, 1992 to September 30, 1993.…
This thesis applies entropy as a model independent measure to address three research questions concerning financial time series. In the first study we apply transfer entropy to drawdowns and drawups in foreign exchange rates, to study their…
Brownian escape is key to a wealth of physico-chemical processes, including polymer folding, and information storage. The frequency of thermally activated energy barrier crossings is assumed to generally decrease exponentially with…
A microscopic model is established for financial Brownian motion from the direct observation of the dynamics of high-frequency traders (HFTs) in a foreign exchange market. Furthermore, a theoretical framework parallel to molecular kinetic…
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that…
We investigate a moving boundary problem for a Brownian particle on the semi-infinite line in which the boundary moves by a distance proportional to the time between successive collisions of the particle and the boundary. Phenomenologically…
Statistical dynamics of financial systems is investigated, based on a model of a randomly coupled equation system driven by a stochastic Langevin force. Anticorrelations of price returns, and subdiffusion of prices is found from the model,…
Fractional Brownian motion, a stochastic process with long-time correlations between its increments, is a prototypical model for anomalous diffusion. We analyze fractional Brownian motion in the presence of a reflecting wall by means of…
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential…
We study a generalized geometric Brownian motion framework that incorporates both entries of new units and exit mechanisms for the current population, extending earlier stochastic resetting models where these rates are treated as identical.…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
The stochastic motion of a particle with long-range correlated increments (the moving phase) which is intermittently interrupted by immobilizations (the traping phase) in a disordered medium is considered in the presence of an external…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…