Related papers: Correlation Patterns in Foreign Exchange Markets
Correlations between asset returns are important in many financial applications. In recent years, multivariate volatility models have been used to describe the time-varying feature of the correlations. However, the curse of dimensionality…
We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of…
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
In a system containing a large number of interacting stochastic processes, there will typically be many non-zero correlation coefficients. This makes it difficult to either visualize the system's inter-dependencies, or identify its dominant…
The purpose of this study is to estimate the correlation structure between multiple assets using financial text analysis. In recent years, as the background of elevating inflation in the global economy and monetary policy tightening by…
In a money exchange process involving a seller and a buyer, we develop a straightforward model encompassing conservative, non-conservative, and systems with or without debt. Our model integrates the Fermi function to capture the behavior of…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
Intuitively, the default risk of a single borrower is higher when her or his assets and debt are denominated in different currencies. Additionally, the default dependence of borrowers with assets and debt in different currencies should be…
Using random matrix technique we determine an exact relation between the eigenvalue spectrum of the covariance matrix and of its estimator. This relation can be used in practice to compute eigenvalue invariants of the covariance…
Scaling properties in financial fluctuations are reviewed from the standpoint of statistical physics. We firstly show theoretically that the balance of demand and supply enhances fluctuations due to the underlying phase transition…
Multivariate Distributions are needed to capture the correlation structure of complex systems. In previous works, we developed a Random Matrix Model for such correlated multivariate joint probability density functions that accounts for the…
Quantum theory is used to model secondary financial markets. Contrary to stochastic descriptions, the formalism emphasizes the importance of trading in determining the value of a security. All possible realizations of investors holding…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…
In complex systems, crucial parameters are often subject to unpredictable changes in time. Climate, biological evolution and networks provide numerous examples for such non-stationarities. In many cases, improved statistical models are…