Related papers: Unravelling the trading invariance hypothesis
Directional-change Intrinsic Time analysis has long revealed scaling laws in market microstructure, but the origin of their stability remains elusive. This article presents evidence that Intrinsic Time can be modeled as a memoryless…
We quantitatively investigate the ideas behind the often-expressed adage `it takes volume to move stock prices', and study the statistical properties of the number of shares traded $Q_{\Delta t}$ for a given stock in a fixed time interval…
From a database of direct numerical simulations of homogeneous and isotropic turbulence, generated in periodic boxes of various sizes, we extract the spherically symmetric part of moments of velocity increments and first verify the…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
Publicly traded companies are fundamental units of contemporary economies and markets and are important mechanisms through which humans interact with their environments. Understanding the general properties that underlie the processes of…
We show that assuming that the returns are independent when conditioned on the value of their variance (volatility), which itself varies in time randomly, then the distribution of returns is well described by the statistics of the sum of…
Financial markets provide an ideal frame for the study of crossing or first-passage time events of non-Gaussian correlated dynamics mainly because large data sets are available. Tick-by-tick data of six futures markets are herein considered…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
Based on empirical financial time-series, we show that the "silence-breaking" probability follows a super-universal power law: the probability of observing a large movement is inversely proportional to the length of the on-going…
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…
Energy markets and the associated energy futures markets play a crucial role in global economies. We investigate the statistical properties of the recurrence intervals of daily volatility time series of four NYMEX energy futures, which are…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…
Many systems of different nature exhibit scale free behaviors. Economic systems with power law distribution in the wealth is one of the examples. To better understand the working behind the complexity, we undertook an empirical study…
The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and…
We study how the order of N independent random walks in one dimension evolves with time. Our focus is statistical properties of the inversion number m, defined as the number of pairs that are out of sort with respect to the initial…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…
In the seminal paper on optimal execution of portfolio transactions, Almgren and Chriss (2001) define the optimal trading strategy to liquidate a fixed volume of a single security under price uncertainty. Yet there exist situations, such as…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…