Related papers: Linear and nonlinear market correlations: characte…
In this paper, we examine the interlinkages among firms through a financial network where cross-holdings on both equity and debt are allowed. We relate mathematically the correlation among equities with the unconditional correlation of the…
In this article we deal with the problem of portfolio allocation by enhancing network theory tools. We use the dependence structure of the correlations network in constructing some well-known risk-based models in which the estimation of…
We revisit the index leverage effect, that can be decomposed into a volatility effect and a correlation effect. We investigate the latter using a matrix regression analysis, that we call `Principal Regression Analysis' (PRA) and for which…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
We present the unified market-based description of returns and variances of the trades with shares of a particular security, of the trades with shares of all securities in the market, and of the trades with the market portfolio. We consider…
We propose a non linear Langevin equation as a model for stock market fluctuations and crashes. This equation is based on an identification of the different processes influencing the demand and supply, and their mathematical transcription.…
In this paper, we explore the detection of clusters of stocks that are in synergy in the Indian Stock Market and understand their behaviour in different circumstances. We have based our study on high frequency data for the year 2014. This…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
The financial market is a complex dynamical system composed of a large variety of intricate relationships between several entities, such as banks, corporations and institutions. At the heart of the system lies the stock exchange mechanism,…
Stimulated by the growing interest in the applications of complex networks framework on time series analysis, we devise a network model in which each of $N$ nodes is associated with a random walk of length $L$. Connectivity between any two…
The main contribution of the paper is to employ the financial market network as a useful tool to improve the portfolio selection process, where nodes indicate securities and edges capture the dependence structure of the system. Three…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
The recent financial crisis has stressed the need to understand financial systems as networks of interdependent countries, where cross-border financial linkages play the fundamental role. It has also been emphasized that the relevance of…
We present the clustering analysis of the financial markets of S&P 500 (USA) and Nikkei 225 (JPN) markets over a period of 2006-2019 as an example of a complex system. We investigate the statistical properties of correlation matrices…
We compare correlations and coherent structures in nuclei and financial markets. In the nuclear physics part we review giant resonances which can be interpreted as a coherent structure embedded in chaos. With similar methods we investigate…
The correlation coefficient between stocks depends on price history and includes information on hierarchical structure in financial markets. It is useful for portfolio selection and estimation of risk. I introduce the Life Time of…
Cross-correlation analysis is a powerful tool for understanding the mutual dynamics of time series. This study introduces a new method for predicting the future state of synchronization of the dynamics of two financial time series. To this…