Related papers: Open Markets
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
There is substantial empirical evidence showing the fundamental portfolio outperforming the market portfolio. Here a theoretical foundation is laid that supports this empirical research. Assuming stock prices revert around fundamental…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
The capitalization-weighted total relative variation $\sum_{i=1}^d \int_0^\cdot \mu_i (t) \mathrm{d} \langle \log \mu_i \rangle (t)$ in an equity market consisting of a fixed number $d$ of assets with capitalization weights $\mu_i (\cdot)$…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
Financial markets show a number of non-stationarities, ranging from volatility fluctuations over ever changing technical and regulatory market conditions to seasonalities. On the other hand, financial markets show various stylized facts…
Order matching systems form the backbone of modern equity exchanges, used by millions of investors daily. Thus, their operation is strictly controlled through numerous regulatory directives to ensure that markets are fair and transparent.…
General equilibrium, the cornerstone of modern economics and finance, rests on assumptions many markets do not meet. Spectrum auctions, electricity markets, and cap-and-trade programs for resource rights often feature non-convexities in…
Most of parameters used to describe states and dynamics of financial market depend on proportions of the appropriate variables rather than on their actual values. Therefore, projective geometry seems to be the correct language to describe…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
Large and stable indices of the world wide stock markets such as NYSE and SP 500 together with NASDAQ -- the index representing markets of new trends, and WIG -- the index of the local stock market of Eastern Europe, are considered. Due to…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
For common people, in contrast to brokers, bankers, and those who play on rising and falling prices of stocks, the stock market law is based on the simple fact that the depositors aim for financial profit at any given concrete stage. The…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
Open source and commercial applications used to be two separate worlds. The former was the work of amateurs who had little interest in making a profit, while the latter was only profit oriented and was produced by big companies. Nowadays…
The so called "globalization" process (i.e. the inexorable integration of markets, currencies, nation-states, technologies and the intensification of consciousness of the world as a whole) has a behavior exactly equivalent to a system that…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…
An artificial stock market is established based on multi-agent . Each agent has a limit memory of the history of stock price, and will choose an action according to his memory and trading strategy. The trading strategy of each agent evolves…
We describe and document three mechanisms by which corporations can influence or even control stock prices. (i) Parent and holding companies wield control over other publicly traded companies. (ii) Through clever management of treasury…