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The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
Complex systems are usually non-stationary and their dynamics is often dominated by collective effects. Collectivity, defined as coherent motion of the whole system or of some of its parts, manifests itself in the time-dependent structures…
We consider the problem of locating a jump discontinuity (change-point) in a smooth parametric regression model with a bounded covariate. It is assumed that one can sample the covariate at different values and measure the corresponding…
In this paper an econophysics model for the currency exchange operations with commission is proposed. With this purpose some analogies and similarities of the processes that take place in the frame of the electrochemical system made from…
A positive correlation between exposure and counterparty credit risk gives rise to the so-called Wrong-Way Risk (WWR). Even after a decade of the financial crisis, addressing WWR in both sound and tractable ways remains challenging.…
We carry out a detailed large-scale data analysis of price response functions in the spot foreign exchange market for different years and different time scales. Such response functions provide quantitative information on the deviation from…
In multivariate time series, the estimation of the covariance matrix of the observation innovations plays an important role in forecasting as it enables the computation of the standardized forecast error vectors as well as it enables the…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
Correlations between random variables play an important role in applications, e.g.\ in financial analysis. More precisely, accurate estimates of the correlation between financial returns are crucial in portfolio management. In particular,…
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification…
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.…
Coherence between the velocity fluctuations measured at two points is investigated in a turbulent jet flow. Coherence is calculated in different regions of the flow by changing the separation between the points, the distance between the…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
Time-to-event semi-competing risk endpoints may be correlated when both events are occurring on the same individual. These events and the association between them may also be influenced by individual characteristics. In this paper, we…
The general problem of asset pricing when the discount rate differs from the rate at which an asset's cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each…
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…
The financial crisis of 2007/08 caused catastrophic consequences and brought a bunch of changes around the world. Interest rates that were known to follow or behave similarly of each other diverged. Furthermore, the regulation and in…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…