Related papers: Quantile Dependence between Stock Markets and its …
The study of the critical dynamics in complex systems is always interesting yet challenging. Here, we choose financial market as an example of a complex system, and do a comparative analyses of two stock markets - the S&P 500 (USA) and…
We discovered that past changes in the market correlation structure are significantly related with future changes in the market volatility. By using correlation-based information filtering networks we device a new tool for forecasting the…
In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
This paper analyzes the process of long-run co-movements and stock market globalization on the basis of cointegration tests and vector error correction (VEC) models. The cointegration tests used here allow for structural breaks to be…
Stock market prediction is still a challenging problem because there are many factors effect to the stock market price such as company news and performance, industry performance, investor sentiment, social media sentiment and economic…
Accurate forecasting of volatility and return quantiles is essential for evaluating financial tail risks such as value-at-risk and expected shortfall. This study proposes an extension of the traditional stochastic volatility model, termed…
This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the…
Multivariate Distributions are needed to capture the correlation structure of complex systems. In previous works, we developed a Random Matrix Model for such correlated multivariate joint probability density functions that accounts for the…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
The evolution of the probability distributions of Japan and US major market indices, NIKKEI 225 and NASDAQ composite index, and $JPY/DEM$ and $DEM/USD$ currency exchange rates is described by means of the Fokker-Planck equation (FPE). In…
The cross-correlation matrix of daily returns of stock market indices in a diverse set of 37 countries worldwide was analyzed. Comparison of the spectrum of this matrix with predictions of random matrix theory provides an empirical evidence…
We investigate the daily correlation present among market indices of stock exchanges located all over the world in the time period Jan 1996 - Jul 2009. We discover that the correlation among market indices presents both a fast and a slow…
This paper continues a series of studies devoted to analysis of the bivariate probability distribution P(x,y) of two consecutive price increments x (push) and y (response) at intraday timescales for a group of stocks. Besides the asymmetry…
Using the framework of factor models, we establish the general expression of the coefficient of tail dependence between the market and a stock (i.e., the probability that the stock incurs a large loss, assuming that the market has also…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
Taking the European Central Bank unconventional policies as a reference, we suggest a class of Multiplicative Error Models (MEM) taylored to analyze the impact such policies have on stock market volatility. The new set of models, called MEM…
In this paper, we consider a wide class of time-varying multivariate causal processes which nests many classic and new examples as special cases. We first prove the existence of a weakly dependent stationary approximation for our model…
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…