Related papers: Asset Price Distributions and Efficient Markets
In this short note the theory for multivariate asset allocation with elliptically symmetric distributions of returns, as developed in the author's prior work, is specialized to the case of returns drawn from a multivariate Laplace…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
As a typical representation of complex networks studied relatively thoroughly, financial market presents some special details, such as its nonconservation and opinions spreading. In this model, agents congregate to form some clusters, which…
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
We introduce an auto-regressive model which captures the growing nature of realistic markets. In our model agents do not trade with other agents, they interact indirectly only through a market. Change of their wealth depends, linearly on…
Understanding variable dependence, particularly eliciting their statistical properties given a set of covariates, provides the mathematical foundation in practical operations management such as risk analysis and decision-making given…
Financial firms and institutional investors are routinely evaluated based on their performance relative to their peers. These relative performance concerns significantly influence risk-taking behavior and market dynamics. While the…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
Posted price mechanisms are prevalent in allocating goods within online marketplaces due to their simplicity and practical efficiency. We explore a fundamental scenario where buyers' valuations are independent and identically distributed,…
Price fluctuations of commodities like cotton and wheat are thought to display probability distributions of returns that follow a L\'evy stable distribution. Recent analysis of stocks and foreign exchange markets show that the probability…
We consider a market model that consists of financial investors and producers of a commodity. Producers optionally store some production for future sale and go short on forward contracts to hedge the uncertainty of the future commodity…
This paper investigates the problem of ensembling multiple strategies for sequential portfolios to outperform individual strategies in terms of long-term wealth. Due to the uncertainty of strategies' performances in the future market, which…
Beta-sorted portfolios -- portfolios comprised of assets with similar covariation to selected risk factors -- are a popular tool in empirical finance to analyze models of (conditional) expected returns. Despite their widespread use, little…
We estimate the global minimum variance (GMV) portfolio in the high-dimensional case using results from random matrix theory. This approach leads to a shrinkage-type estimator which is distribution-free and it is optimal in the sense of…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
For long term investments, model portfolios are defined at the level of indexes, a setup known as Strategic Asset Allocation (SAA). The possible outcomes at a scale of a few decades can be obtained by Monte Carlo simulations, resulting in a…
Recent studies have revealed a number of striking dependence patterns in high frequency stock price dynamics characterizing probabilistic interrelation between two consequent price increments x (push) and y (response) as described by the…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
This paper shows that in suitable markets, even with out-of-equilibrium trade allowed, a simple price update rule leads to rapid convergence toward the equilibrium. In particular, this paper considers a Fisher market repeated over an…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…