Related papers: Correlation Patterns in Foreign Exchange Markets
In this work, we identify the most general measure of arbitrage for any market model governed by It\^o processes. We show that our arbitrage measure is invariant under changes of num\'{e}raire and equivalent probability. Moreover, such…
Quanto options allow the buyer to exchange the foreign currency payoff into the domestic currency at a fixed exchange rate. We investigate quanto options with multiple underlying assets valued in different foreign currencies each with a…
Understanding the role of correlations in quantum systems is both a fundamental challenge as well as of high practical relevance for the control of multi-particle quantum systems. Whereas a lot of research has been devoted to study the…
The fluctuations in nonequilibrium systems are under intense theoretical and experimental investigation. Topical ``fluctuation relations'' describe symmetries of the statistical properties of certain observables, in a variety of models and…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
In multivariate time series, the estimation of the covariance matrix of the observation innovations plays an important role in forecasting as it enables the computation of the standardized forecast error vectors as well as it enables the…
The association between log-price increments of exchange-traded equities, as measured by their spot correlation estimated from high-frequency data, exhibits a pronounced upward-sloping and almost piecewise linear relationship at the…
The financial market is nonpredictable, as according to the Bachelier, the mathematical expectation of the speculator is zero. Nevertheless, we observe in the price fluctuations the two distinct scales, short and long time. Behaviour of a…
Identifying and quantifying co-dependence between financial instruments is a key challenge for researchers and practitioners in the financial industry. Linear measures such as the Pearson correlation are still widely used today, although…
In this paper the dynamics of an economic system with foreign financing, of integer or fractional order, are analyzed. The symmetry of the system determines the existence of two pairs of coexisting attractors. The integer-order version of…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
Financial stock returns correlations have been studied in the prism of random matrix theory, to distinguish the signal from the "noise". Eigenvalues of the matrix that are above the rescaled Marchenko Pastur distribution can be interpreted…
In this work the system of agents is applied to establish a model of the nonlinear distributed signal processing. The evolution of the system of the agents - by the prediction time scale diversified trend followers, has been studied for the…
We discuss recent work in the study of a simple model for the collective behaviour of diverse speculative agents in an idealized stockmarket, considered from the perspective of the statistical physics of many-body systems. The only…
A statistical physics model for the time evolutions of stock portfolios is proposed. In this model the time series of price changes are coded into the sequences of up and down spins. The Hamiltonian of the system is introduced and is…
We consider the problem of maximizing portfolio value when an agent has a subjective view on asset value which differs from the traded market price. The agent's trades will have a price impact which affect the price at which the asset is…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
Time-varying volatility is an inherent feature of most economic time-series, which causes standard correlation estimators to be inconsistent. The quadrant correlation estimator is consistent but very inefficient. We propose a novel…
The imbalance of buying and selling functions profoundly in the formation of market trends, however, a fine-granularity investigation of the imbalance is still missing. This paper investigates a unique transaction dataset that enables us to…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…