Related papers: The Random Walk behind Volatility Clustering
We investigate the tendency for financial instruments to form clusters when there are multiple factors influencing the correlation structure. Specifically, we consider a stock portfolio which contains companies from different industrial…
Random walks serve as important tools for studying complex network structures, yet their dynamics in cases where transition probabilities are not static remain under explored and poorly understood. Here we study nonlinear random walks that…
We propose a novel method to quantify the clustering behavior in a complex time series and apply it to a high-frequency data of the financial markets. We find that regardless of used data sets, all data exhibits the volatility clustering…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
We review recent results obtained from simple individual-based models of biological competition in which birth and death rates of an organism depend on the presence of other competing organisms close to it. In addition the individuals…
We propose a dynamical theory of market liquidity that predicts that the average supply/demand profile is V-shaped and {\it vanishes} around the current price. This result is generic, and only relies on mild assumptions about the order flow…
We describe a new model to simulate the dynamic interactions between market price and the decisions of two different kind of traders. They possess spatial mobility allowing to group together to form coalitions. Each coalition follows a…
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in…
Random walks are one of the best investigated dynamical processes on graphs. A particularly fascinating phenomenon is the scaling relationship of fluctuations $\sigma $ with the average flux $\langle f \rangle $. Here we analyze how network…
The versatility of renewal theory is owed to its abstract formulation. Renewals can be interpreted as steps of a random walk, switching events in two-state models, domain crossings of a random motion, etc. We here discuss a renewal process…
Community assembly is studied using individual-based multispecies models. The models have stochastic population dynamics with mutation, migration, and extinction of species. Mutants appear as a result of mutation of the resident species,…
We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…
The distribution of price returns for a class of uncorrelated diffusive dynamics is considered. The basic assumptions are (1) that there is a "consensus" value associated with a stock, and (2) that the rate of diffusion depends on the…
We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…
One approach to the analysis of stochastic fluctuations in market prices is to model characteristics of investor behaviour and the complex interactions between market participants, with the aim of extracting consequences in the aggregate.…
The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…
The waiting time needed for a stock market index to undergo a given percentage change in its value is found to have an up-down asymmetry, which, surprisingly, is not observed for the individual stocks composing that index. To explain this,…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
The financial market is nonpredictable, as according to the Bachelier, the mathematical expectation of the speculator is zero. Nevertheless, we observe in the price fluctuations the two distinct scales, short and long time. Behaviour of a…