Related papers: Cross impact in derivative markets
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
Based on the analog between the stochastic dynamics and quantum harmonic oscillator, we propose a market force driving model to generalize the Black-Scholes model in finance market. We give new schemes of option pricing, in which we can…
Financial derivatives are contracts that can have a complex payoff dependent upon underlying benchmark assets. In this work, we present a quantum algorithm for the Monte Carlo pricing of financial derivatives. We show how the relevant…
A new index for high-impact weather forecasting is introduced and assessed in comparison with the well-established extreme forecast index (EFI). Two other ensemble summary statistics are also included in this comparison study: the…
Addressing the ongoing examination of high-frequency trading practices in financial markets, we report the results of an extensive empirical study estimating the maximum possible profitability of the most aggressive such practices, and…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
The correct understanding of commodity price dynamics can bring relevant improvements in terms of policy formulation both for developing and developed countries. Agricultural, metal and energy commodity prices might depend on each other:…
The paper presents two new approaches to modeling the interaction of small and medium pricetaking traders with a stock exchange. In the framework of these approaches, the traders can form and manage their portfolios of financial instruments…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
How do cost shocks pass through to prices in markets with price dispersion? We decompose the problem into two layers. In the competition layer, consumers' consideration sets determine equilibrium distributions of normalized margins. In the…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
The Black-Scholes theory of option pricing has been considered for many years as an important but very approximate zeroth-order description of actual market behavior. We generalize the functional form of the diffusion of these systems and…
We present an analysis of the price impact associated with trades effected by different financial firms. Using data from the Spanish Stock Market, we find a high degree of heterogeneity across different market members, both in the…
A computational technique borrowed from the physical sciences is introduced to obtain accurate closed-form approximations for the transition probability of arbitrary diffusion processes. Within the path integral framework the same technique…
This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is…
We estimate prices of exotic options in a discrete-time model-free setting when the trader has access to market prices of a rich enough class of exotic and vanilla options. This is achieved by estimating an unobservable quantity called…
Accurately forecasting the price of oil, the world's most actively traded commodity, is of great importance to both academics and practitioners. We contribute by proposing a functional time series based method to model and forecast oil…
We proposed a model of interacting market agents based on the Ising spin model. The agents can take three actions: "buy," "sell," or "stay inactive." We defined a price evolution in terms of the system magnetization. The model reproduces…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…