Related papers: A Flexible Stochastic Conditional Duration Model
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
A new stochastic theory of a foreign exchange markets dynamics is developed. As a result we have the new probability distribution which well describes statistical and scaling dependencies ''experimentally'' observed in foreign exchange…
In this short paper, we study the simulation of a large system of stochastic processes subject to a common driving noise and fast mean-reverting stochastic volatilities. This model may be used to describe the firm values of a large pool of…
Stochastic ordering among distributions has been considered in a variety of scenarios. Economic studies often involve research about the ordering of investment strategies or social welfare. However, as noted in the literature, stochastic…
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…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
In this paper, we provide a simple, ``generic'' interpretation of multifractal scaling laws and multiplicative cascade process paradigms in terms of volatility correlations. We show that in this context 1/f power spectra, as observed…
In this paper we propose a data-driven distributionally robust Model Predictive Control framework for constrained stochastic systems with unbounded additive disturbances. Recursive feasibility is ensured by optimizing over an linearly…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
Modeling distributions that depend on external control parameters is a common scenario in diverse applications like molecular simulations, where system properties like temperature affect molecular configurations. Despite the relevance of…
In many physical, social or economical phenomena we observe changes of a studied quantity only in discrete, irregularly distributed points in time. The stochastic process used by physicists to describe this kind of variables is the…
In this work, we consider systems that are subjected to intermittent instabilities due to external stochastic excitation. These intermittent instabilities, though rare, have a large impact on the probabilistic response of the system and…
Hoeffding's Inequality provides the maximum probability that a series of n draws from a bounded random variable differ from the variable's true expectation u by more than given tolerance t. The random variable is typically the error rate of…
We present data-dependent learning bounds for the general scenario of non-stationary non-mixing stochastic processes. Our learning guarantees are expressed in terms of a data-dependent measure of sequential complexity and a discrepancy…
Stochastic processes that are randomly reset to an initial condition serve as a showcase to investigate non-equilibrium steady states. However, all existing results have been restricted to the special case of memoryless resetting protocols.…
Most research designing novel predictive models, or employing existing ones, assumes that training and testing data are independent and identically distributed. In practice, the data encountered at serving time often deviate from the…
Proceeding from the concept of rational expectations, a new dynamic model of supply and demand in a single market with one supplier, one buyer, and one kind of commodity is developed. Unlike the cob-web dynamic theories with adaptive…
The Foreign Exchange (Forex) is a large decentralized market, on which trading analysis and algorithmic trading are popular. Research efforts have been focusing on proof of efficiency of certain technical indicators. We demonstrate,…