Related papers: Correlation Patterns in Foreign Exchange Markets
A dynamical model of capital exchange is introduced in which a specified amount of capital is exchanged between two individuals when they meet. The resulting time dependent wealth distributions are determined for a variety of exchange…
Trading styles can be classified into either trend-following or mean-reverting. If the net trading style is trend-following the traded asset is more likely to move in the same direction it moved previously (the opposite is true if the net…
In order to emphasize cross-correlations for fluctuations in major market places, series of up and down spins are built from financial data. Patterns frequencies are measured, and statistical tests performed. Strong cross-correlations are…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group…
Complex systems are often non-stationary, typical indicators are continuously changing statistical properties of time series. In particular, the correlations between different time series fluctuate. Models that describe the multivariate…
We consider a portfolio allocation problem for trend following (TF) strategies on multiple correlated assets. Under simplifying assumptions of a Gaussian market and linear TF strategies, we derive analytical formulas for the mean and…
Statistical dynamics of financial systems is investigated, based on a model of a randomly coupled equation system driven by a stochastic Langevin force. Anticorrelations of price returns, and subdiffusion of prices is found from the model,…
Specialized topics on financial data analysis from a numerical and physical point of view are discussed. They pertain to the analysis of crash prediction in stock market indices and to the persistence or not of coherent and random sequences…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
A parameterization that is a modified version of a previous work is proposed for the returns and correlation matrix of financial time series and its properties are studied. This parameterization allows easy introduction of non-stationarity…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
A money transfer involves a buyer and a seller. A buyer buys goods or services from a seller. The money the buyer decreases is the same as that the seller increases. At each time step, a pair of socially connected agents are selected and…
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
The decentralized international market of currency trading is a prototypical complex system having a highly heterogeneous composition. To understand the hierarchical structure relating the price movement of different currencies in the…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
We analyze correlations among stock returns via a series of widely adopted parameters which we refer to as explanatory variables. We subsequently exploit the results to propose a long only quantitative adaptive technique to construct a…
Covariance is used as an inner product on a formal vector space built on n random variables to define measures of correlation Md across a set of vectors in a d-dimensional space. For d = 1, one has the diameter; for d = 2, one has an area.…