Related papers: Systematic Noise: Micro-movements in Equity Option…
We suggest that one individual holds multiple degrees of belief about an outcome, given the evidence. We then investigate the implications of such noisy probabilities for a buyer and a seller of binary options and find the odds agreed upon…
This paper shows that jumps in financial asset prices are often erroneously identified and are, in fact, rare events accounting for a very small proportion of the total price variation. We apply new econometric techniques to a comprehensive…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
The value of stocks, indices and other assets, are examples of stochastic processes with unpredictable dynamics. In this paper, we discuss asymmetries in short term price movements that can not be associated with a long term positive trend.…
"Noise-induced volatility" refers to a phenomenon of increased level of fluctuations in the collective dynamics of bistable units in the presence of a rapidly varying external signal, and intermediate noise levels. The archetypical…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
Recent studies inspired by results from random matrix theory [1,2,3] found that covariance matrices determined from empirical financial time series appear to contain such a high amount of noise that their structure can essentially be…
We formulate a discrete-time Bayesian stochastic volatility model for high-frequency stock-market data that directly accounts for microstructure noise, and outline a Markov chain Monte Carlo algorithm for parameter estimation. The methods…
Motivated by how transaction amount constrain trading volume and price volatility in stock market, we, in this paper, study the relation between volume and price if amount of transaction is given. We find that accumulative trading volume…
Volatility means the degree of variation of a stock price which is important in finance. Realized Volatility (RV) is an estimator of the volatility calculated using high-frequency observed prices. RV has lately attracted considerable…
We test the hypothesis that consecutive intraday price changes in the most liquid U.S. equity ETF (SPY) are conditionally nonrandom. Using NBBO event-time data for about 1,500 regular trading days, we form for every lag L ordered pairs of a…
According to recent findings [1,2], empirical covariance matrices deduced from financial return series contain such a high amount of noise that, apart from a few large eigenvalues and the corresponding eigenvectors, their structure can…
An interesting analog circuit for simulating a signal with fluctuations having a probability density function with a power tail has recently been proposed and constructed. The exponent of the power law can be fixed by tuning an appropriate…
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…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
Noisy fluctuations are ubiquitous in complex systems. They play a crucial or delicate role in the dynamical evolution of gene regulation, signal transduction, biochemical reactions, among other systems. Therefore, it is essential to…