Related papers: The Random Walk behind Volatility Clustering
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and the exogenous noise is the primary…
Gas-solid multiphase flows are prone to develop an instability known as clustering. Two-fluid models, which treat the particulate phase as a continuum, are known to reproduce the qualitative features of this instability, producing…
Although higher-order interactions are known to affect the typical state of dynamical processes giving rise to new collective behavior, how they drive the emergence of rare events and fluctuations is still an open problem. We investigate…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
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…
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…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
What return should you expect when you take on a given amount of risk? How should that return depend upon other people's behavior? What principles can you use to answer these questions? In this paper, we approach these topics by exploring…
We prove an invariance principle for continuous-time random walks in a dynamically averaging environment on $\mathbb Z$. In the beginning, the conductances may fluctuate substantially, but we assume that as time proceeds, the fluctuations…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
An analysis of the stylized facts in financial time series is carried out. We find that, instead of the heavy tails in asset return distributions, the slow decay behaviour in autocorrelation functions of absolute returns is actually…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
Clustering is a central approach for unsupervised learning. After clustering is applied, the most fundamental analysis is to quantitatively compare clusterings. Such comparisons are crucial for the evaluation of clustering methods as well…
In nature and human societies, the effects of homogeneous and heterogeneous characteristics on the evolution of collective behaviors are quite different from each other. It is of great importance to understand the underlying mechanisms of…
A simple spin model is studied, motivated by the dynamics of traders in a market where expectation bubbles and crashes occur. The dynamics is governed by interactions which are frustrated across different scales: While ferromagnetic…
Fluctuation scaling is observed phenomenon from complex networks through finance to ecology. It means that the variance and the mean of a specific quantity are related as $\ev{\sigma^2|n}\propto \ev{n|A}^{2\alpha}$ with $1/2\geq \alpha \geq…
This paper studies the switching of trading strategies and its effect on the market volatility in a continuous double auction market. We describe the behavior when some uninformed agents, who we call switchers, decide whether or not to pay…
Earthquake occurrence in nature is thought to result from correlated elastic stresses, leading to clustering in space and time. We show that occurrence of major earthquakes in California correlates with time intervals when fluctuations in…
What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made,…
A society of agents, with ideological positions, or "opinions" measured by real values ranging from $-\infty$ (the "far left") to $+\infty$ (the "far right"), is considered. At fixed (unit) time intervals agents repeatedly reconsider and…