Related papers: A Structural Model for Fluctuations in Financial M…
This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices…
In finance, the price of a volatile asset can be modeled using fractional Brownian motion (fBm) with Hurst parameter $H>1/2.$ The Black-Scholes model for the values of returns of an asset using fBm is given as, [Y_t=Y_0…
We derive a system of stochastic differential equations simulating the dynamics of the three agent groups with herding interaction. Proposed approach can be valuable in the modeling of the complex socio-economic systems with similar…
We construct an equilibrium for the continuous time Kyle's model with stochastic liquidity, a general distribution of the fundamental price, and correlated stock and volatility dynamics. For distributions with positive support, our…
Standard models of asset price dynamics, such as geometric Brownian motion (see, for example, Osborne, 1959, Samuelson, 2016), do not formally incorporate investor inertia. This paper presents a two-stage framework for modelling this…
We study the price dynamics of stocks traded in a financial market by considering the statistical properties both of a single time series and of an ensemble of stocks traded simultaneously. We use the $n$ stocks traded in the New York Stock…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
We study a generalized geometric Brownian motion framework that incorporates both entries of new units and exit mechanisms for the current population, extending earlier stochastic resetting models where these rates are treated as identical.…
In this paper, we provide a simple, ``generic'' interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as observed…
We generalise the description of the dynamics of the order book of financial markets in terms of a Brownian particle embedded in a fluid of incoming, exiting and annihilating particles by presenting a model of the velocity on each side (buy…
In this paper we propose a deep recurrent architecture for the probabilistic modelling of high-frequency market prices, important for the risk management of automated trading systems. Our proposed architecture incorporates probabilistic…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We develop a novel observation-driven model for high-frequency prices. We account for irregularly spaced observations, simultaneous transactions, discreteness of prices, and market microstructure noise. The relation between trade durations…
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…
In this paper, we show that the recent integration of statistical models with deep recurrent neural networks provides a new way of formulating volatility (the degree of variation of time series) models that have been widely used in time…
The transient fluctuation of the prosperity of firms in a network economy is investigated with an abstract stochastic model. The model describes the profit which firms make when they sell materials to a firm which produces a product and the…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance…
We calculate the realized volatility in the spin model of financial markets and examine the returns standardized by the realized volatility. We find that moments of the standardized returns agree with the theoretical values of standard…
We reformulate the Cont-Bouchaud model of financial markets in terms of classical "super-spins" where the spin value is a measure of the number of individual traders represented by a portfolio manager of an investment agency. We then extend…