Related papers: Price, Volatility and the Second-Order Economic Th…
In the standard equilibrium and/or arbitrage pricing framework, the value of any asset is uniquely specified from the belief that only the systematic risks need to be remunerated by the market. Here, we show that, even for arbitrary large…
We demonstrated the analogy between Economics and Gauge Theory of Plasticity and used it to describe the relationship between money supply and inflation at the economic market. The received equations of economical dynamics in phase space…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
This paper is concerned with nonlinear filtering of the coefficients in asset price models with stochastic volatility. More specifically, we assume that the asset price process $ S=(S_{t})_{t\geq0} $ is given by \[…
The available liquidity at any time in financial markets falls largely short of the typical size of the orders that institutional investors would trade. In order to reduce the impact on prices due to the execution of large orders, traders…
There are two distinct definitions of 'P-value' for evaluating a proposed hypothesis or model for the process generating an observed dataset. The original definition starts with a measure of the divergence of the dataset from what was…
There are several approaches to modeling and forecasting time series as applied to prices of commodities and financial assets. One of the approaches is to model the price as a non-stationary time series process with heteroscedastic…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
Classic studies of the probability density of price fluctuations $g$ for stocks and foreign exchanges of several highly developed economies have been interpreted using a {\it power-law} probability density function $P(g) \sim…
We explore nature of price formation in financial markets and develop a theory of bid and ask price dynamics in which the two prices form due to quantum-chaotic interaction between buy and sell orders. In this model bid and ask prices are…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…
This paper explores the application of Sample Entropy (SampEn) as a sophisticated tool for quantifying and predicting volatility in international oil price returns. SampEn, known for its ability to capture underlying patterns and predict…
This paper is concerned with nonlinear filtering of the coefficients in asset price models with stochastic volatility. More specifically, we assume that the asset price process $S=(S_{t})_{t\geq0}$ is given by \[ dS_{t}=m(\theta_{t})S_{t}…
In this paper we introduce a new concept for modelling electricity prices through the introduction of an unobservable intrinsic electricity price $p(\tau)$. We use it to connect the classical theory of storage with the concept of a risk…
The fundamental equations of various disciplines often seem to share the same basic structure. Natural selection increases information in the same way that Bayesian updating increases information. Thermodynamics and the forms of common…
We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple.…
In financial markets, accurately measuring the risk of future fluctuations in asset prices is of paramount importance. Studies such as Carr and Madan have shown that the expected value of the quadratic variation of log prices can be…
Accuracy of economic theories and efficiency of economic policy strictly depend on the choice of the economic variables and processes mostly liable for description of economic reality. That states the general problem of assessment of any…
We introduce an interactive market setup with sequential auctions where agents receive variegated signals with a known deadline. The effects of differential information and mutual learning on the allocation of overall profit \& loss (P\&L)…