Related papers: The CMMV Pricing Model in Practice
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
Econometric inference allows an analyst to back out the values of agents in a mechanism from the rules of the mechanism and bids of the agents. This paper gives an algorithm to solve the problem of inferring the values of agents in a…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
In this chapter, an input-output economic model with multiple interactive economic systems is considered. The model captures the multi-dimensional nature of the economic sectors or industries in each economic system, the interdependencies…
We describe a simple model for speculative trading based on adaptive behavior of economic agents.The adaptive behavior is expressed through a feedback mechanism for changing agents' stock-to-bond ratios, depending on the past performance of…
Machine learning in asset pricing typically predicts expected returns as point estimates, ignoring uncertainty. We develop new methods to construct forecast confidence intervals for expected returns obtained from neural networks. We show…
The objective of this work is the investigation of complexity, asymmetry, stochasticity and non-linearity of the financial and economic systems by using the tools of statistical mechanics and information theory. More precisely, this thesis…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
We apply methods of quantum mechanics for mathematical modeling of price dynamics at the financial market. We propose to describe behavioral financial factors (e.g., expectations of traders) by using the pilot wave (Bohmian) model of…
An existing challenge in power systems is the implementation of optimal demand management through dynamic pricing. This paper encompasses the design, analysis and implementation of a novel on-line pricing scheme based on coalitional game…
During the last years, European intraday power markets have gained importance for balancing forecast errors due to the rising volumes of intermittent renewable generation. However, compared to day-ahead markets, the drivers for the intraday…
We explain the main concepts of Prospect Theory and Cumulative Prospect Theory within the framework of rational dynamic asset pricing theory. We derive option pricing formulas when asset returns are altered with a generalized Prospect…
Prediction markets allow traders to bet on potential future outcomes. These markets exist for weather, political, sports, and economic forecasting. Within this work we consider a decentralized framework for prediction markets using…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
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…