Related papers: Modeling Market Inefficiencies within a Single Ins…
Ensuring sufficient liquidity is one of the key challenges for designers of prediction markets. Various market making algorithms have been proposed in the literature and deployed in practice, but there has been little effort to evaluate…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
The vast majority of market impact studies assess each product individually, and the interactions between the different order flows are disregarded. This strong approximation may lead to an underestimation of trading costs and possible…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
We develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer hidden charges from…
Considering that both the entropy-based market information and the Hurst exponent are useful tools for determining whether the efficient market hypothesis holds for a given asset, we study the link between the two approaches. We thus…
In this paper a simple model for the evolution of the forward density of the future value of an asset is proposed. The model allows for a straightforward initial calibration to option prices and has dynamics that are consistent with…
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.…
Equity markets have long been regarded as unpredictable, with intraday price movements treated as stochastic noise. This study challenges that view by introducing the Extended Samuelson Model (ESM), a natural science-based framework that…
Financial markets are nonlinear with complexity, where different types of assets are traded between buyers and sellers, each having a view to maximize their Return on Investment (ROI). Forecasting market trends is a challenging task since…
This study evaluates the scale-dependent informational efficiency of stock markets using the Financial Chaos Index, a tensor-eigenvalue-based measure of realized volatility. Incorporating Granger causality and network-theoretic analysis…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Given the univariate marginals of a real-valued, continuous-time martingale, (respectively, a family of measures parameterised by $t \in [0,T]$ which is increasing in convex order, or a double continuum of call prices) we construct a family…
We present a general Markovian framework for order book modeling. Through our approach, we aim at providing a tool enabling to get a better understanding of the price formation process and of the link between microscopic and macroscopic…
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
We introduce a mathematical theory called market connectivity that gives concrete ways to both measure the efficiency of markets and find inefficiencies in large markets. The theory leads to new methods for testing the famous efficient…
We construct a general stochastic process and prove weak convergence results. It is scaled in space and through the parameters of its distribution. We show that our simplified scaling is equivalent to time scaling used frequently. The…