Related papers: On the correlation analysis of illiquid stocks
This paper introduces unit-specific heterogeneity in panel data threshold regression. We develop the asymptotic theory for models with heterogeneous thresholds, heterogeneous slope coefficients, and interactive fixed effects. The estimation…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
We propose improved methods to identify stock groups using the correlation matrix of stock price changes. By filtering out the marketwide effect and the random noise, we construct the correlation matrix of stock groups in which nontrivial…
This article investigates the Fokker-Planck equations that arise from the application of quantum stochastic calculus to the modelling of illiquid financial markets, using asymptotic methods. We present a power series solution for quantum…
In order to calculate the unobserved volatility in conditional heteroscedastic time series models, the natural recursive approximation is very often used. Following \cite{StraumannMikosch2006}, we will call the model \emph{invertible} if…
We study historical correlations and lead-lag relationships between individual stock risk (volatility of daily stock returns) and market risk (volatility of daily returns of a market-representative portfolio) in the US stock market. We…
This paper analyzes the quantitative relations between stock prices and quantities of tradable stock shares in Chinese stock markets at six time points by means of Exploratory Data Analysis (EDA) method. It is found the resulting formulae…
For a converging sequence of exponential L\'evy models, we give conditions under which the associated sequence of option prices converges. We also study the behaviour of the prices when no such convergence holds. We then consider two…
In this article, we look at the effect of volatility clustering on the risk indifference price of options described by Sircar and Sturm in their paper (Sircar, R., & Sturm, S. (2012). From smile asymptotics to market risk measures.…
This dissertation investigates the ability of the Ising model to replicate statistical characteristics, or stylized facts, commonly observed in financial assets. The study specifically examines in the S&P500 index the following features:…
A simple method is proposed to estimate the instantaneous correlations between state variables in a hybrid system from the empirical correlations between observable market quantities such as spot rate, stock price and implied volatility.…
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…
Testing procedures for predictive regressions with lagged autoregressive variables imply a suboptimal inference in presence of small violations of ideal assumptions. We propose a novel testing framework resistant to such violations, which…
A new model for the stock market price analysis is proposed. It is suggested to look at price as an everywhere discontinuous function of time of bounded variation.
Financial time series exhibit two different type of non linear correlations: (i) volatility autocorrelations that have a very long range memory, on the order of years, and (ii) asymmetric return-volatility (or `leverage') correlations that…
In illiquid markets, option traders may have an incentive to increase their portfolio value by using their impact on the dynamics of the underlying. We provide a mathematical framework within which to value derivatives under market impact…
Multivariate Distributions are needed to capture the correlation structure of complex systems. In previous works, we developed a Random Matrix Model for such correlated multivariate joint probability density functions that accounts for the…
Using Random Matrix Theory one can derive exact relations between the eigenvalue spectrum of the covariance matrix and the eigenvalue spectrum of its estimator (experimentally measured correlation matrix). These relations will be used to…
This article introduces the class of periodic trawl processes, which are continuous-time, infinitely divisible, stationary stochastic processes, that allow for periodicity and flexible forms of their serial correlation, including both…
This article presents, in an illustrative fashion, a first step towards an extension of the spectral theory of constant length substitutions. Our starting point is the general observation that the symbolic picture (as defined by the…