Related papers: Correlation Patterns in Foreign Exchange Markets

The econophysics approach to socio-economic systems is based on the assumption of their complexity. Such assumption inevitably lead to another assumption, namely that underlying interconnections within socio-economic systems, particularly…

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…

Correlations disguised in various forms underlie a host of important phenomena in classical and quantum systems, such as information and energy exchanges. The quantum mutual information and the norm of the correlation matrix are both…

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…

We provide a nonparametric method for the computation of instantaneous multivariate volatility for continuous semi-martingales, which is based on Fourier analysis. The co-volatility is reconstructed as a stochastic function of time by…

We model financial transactions as random walks on activity-driven temporal networks. By enforcing fund conservation, our framework analytically derives heavy-tailed distributions for the stationary balances and transaction sizes.…

We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen-dollar rate, the dollar-euro rate and the yen-euro rate. Next, we propose a model of…

We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…

How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…

This paper introduces a novel approach to financial risk analysis that does not rely on traditional price and market data, instead using market news to model assets as distributions over a metric space of risk factors. By representing asset…

In the evolving domain of cryptocurrency markets, accurate token valuation remains a critical aspect influencing investment decisions and policy development. Whilst the prevailing equation of exchange pricing model offers a quantitative…

Single index financial market models cannot account for the empirically observed complex interactions between shares in a market. We describe a multi-share financial market model and compare characteristics of the volatility, that is the…

This letter explores the behavior of conditional correlations among main cryptocurrencies, stock and bond indices, and gold, using a generalized DCC class model. From a portfolio management point of view, asset correlation is a key metric…

Using one of the key property of copulas that they remain invariant under an arbitrary monotonous change of variable, we investigate the null hypothesis that the dependence between financial assets can be modeled by the Gaussian copula. We…

In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…

Extremal dependence between international stock markets is of particular interest in today's global financial landscape. However, previous studies have shown this dependence is not necessarily stationary over time. We concern ourselves with…

Two formulations are proposed to filter out correlations in the residuals of the multivariate GARCH model. The first approach is to estimate the correlation matrix as a parameter and transform any joint distribution to have an arbitrary…

We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…

In this article we show how to analyze the covariation of bond prices nonparametrically and robustly, staying consistent with a general no-arbitrage setting. This is, in particular, motivated by the problem of identifying the number of…

We discuss a weighted estimation of correlation and covariance matrices from historical financial data. To this end, we introduce a weighting scheme that accounts for similarity of previous market conditions to the present one. The…