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We derive a continuous time model for the joint evolution of the mid price and the bid-ask spread from a multiscale analysis of the whole limit order book (LOB) dynamics. We model the LOB as a multiclass queueing system and perform our…
A classical inventory problem is studied from the perspective of embedded options, reducing inventory-management to the design of optimal contracts for forward delivery of stock (commodity). Financial option techniques \`{a} la…
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and…
We apply the Continuous Time Random Walk (CTRW) framework, introduced in finance by Scalas et al., to the analysis of the probability distribution of time intervals between two consecutive trades in the case of BTP futures prices traded at…
With the increasing integration of power plants into the frequency-regulation markets, the importance of optimal trading has grown substantially. This paper conducts an in-depth analysis of their optimal trading behavior in sequential…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
Trading styles can be classified into either trend-following or mean-reverting. If the net trading style is trend-following the traded asset is more likely to move in the same direction it moved previously (the opposite is true if the net…
This paper studies the optimal VIX futures trading problems under a regime-switching model. We consider the VIX as mean reversion dynamics with dependence on the regime that switches among a finite number of states. For the trading…
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…
We present a unified technique for sequential estimation of convex divergences between distributions, including integral probability metrics like the kernel maximum mean discrepancy, $\varphi$-divergences like the Kullback-Leibler…
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…
Using available data from the New York stock market (NYSM) we test four different bi-parametric models to fit the correspondent volume-price distributions at each $10$-minute lag: the Gamma distribution, the inverse Gamma distribution, the…
Order cancellation process plays a crucial role in the dynamics of price formation in order-driven stock markets and is important in the construction and validation of computational finance models. Based on the order flow data of 18 liquid…
Modifications of the Cont-Bouchaud percolation model for price fluctuations give an asymmetry for time-reversal, an asymmetry between high and low prices, volatility clustering, effective multifractality, correlations between volatility and…
Financial price changes obey two universal properties: they follow a power law and they tend to be clustered in time. The second regularity, known as volatility clustering, entails some predictability in the price changes: while their sign…
We study the problem of dynamically trading multiple futures contracts with different underlying assets. To capture the joint dynamics of stochastic bases for all traded futures, we propose a new model involving a multi-dimensional scaled…
Econophysics and econometrics agree that there is a correlation between volume and volatility in a time series. Using empirical data and their distributions, we further investigate this correlation and discover new ways that volatility and…
Addressing the ongoing examination of high-frequency trading practices in financial markets, we report the results of an extensive empirical study estimating the maximum possible profitability of the most aggressive such practices, and…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
We test whether the futures prices of some commodity and energy markets are determined by stochastic rules or exhibit nonlinear deterministic endogenous fluctuations. As for the methodologies, we use the maximal Lyapunov exponents (MLE) and…