Related papers: Classifying Financial Markets up to Isomorphism
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,…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
We present a financial market model, characterized by self-organized criticality, that is able to generate endogenously a realistic price dynamics and to reproduce well-known stylized facts. We consider a community of heterogeneous traders,…
This paper studies the time-varying structure of the equity market with respect to market capitalization. First, we analyze the distribution of the 100 largest companies' market capitalizations over time, in terms of inequality,…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
We proposed a model of interacting market agents based on the Ising spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of the system magnetization. The model reproduces…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
A financial market is called "diverse" if no single stock is ever allowed to dominate the entire market in terms of relative capitalization. In the context of the standard Ito-process model initiated by Samuelson (1965) we formulate this…
An empirical study of joint bivariate probability distribution of two consecutive price increments for a set of stocks at time scales ranging from one minute to thirty minutes reveals asymmetric structures with respect to the axes y=0, y=x,…
We amend and extend the Chiarella model of financial markets to deal with arbitrary long-term value drifts in a consistent way. This allows us to improve upon existing calibration schemes, opening the possibility of calibrating individual…
We consider the problem of allocating indivisible goods in a way that is fair, using one of the leading market mechanisms in economics: the competitive equilibrium from equal incomes. Focusing on two major classes of valuations, namely…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
We consider the problem of representing claims for coherent risk measures. For this purpose we introduce the concept of (weak and strong) time-consistency with respect to a portfolio of assets, generalizing the one defined by Delbaen. In a…
In order to simulate the complex phenomena manifested in stock markets, we introduce a continuous asynchronous model in which millions of individual traders interact through a central orders matching mechanism, just as it happens in real…
We analyze complexity of financial (and general economic) processes by comparing classical and quantum-like models for randomness. Our analysis implies that it might be that a quantum-like probabilistic description is more natural for…
We introduce a formal framework for analyzing trades in financial markets. These days, all big exchanges use computer algorithms to match buy and sell requests and these algorithms must abide by certain regulatory guidelines. For example,…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…