Related papers: Powers correlation analysis of non-stationary illi…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary…
Researchers have used many different methods to detect the possibility of long-term dependence (long memory) in stock market returns, but evidence is in general mixed. In this paper, three different tests, (namely Rescaled Range (R/S), its…
Recent advances in steady-state analysis of power systems have introduced the equivalent split-circuit approach and corresponding continuation methods that can reliably find the correct physical solution of large-scale power system…
In this paper we consider a fractional stochastic volatility model, that is a model in which the volatility may exhibit a long-range dependent or a rough/antipersistent behavior. We propose a dynamic sequential Monte Carlo methodology that…
In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…
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…
The imbalance of buying and selling functions profoundly in the formation of market trends, however, a fine-granularity investigation of the imbalance is still missing. This paper investigates a unique transaction dataset that enables us to…
To identify emerging interdependencies between traded stocks we investigate the behavior of the stocks of FTSE 100 companies in the period 2000-2015, by looking at daily stock values. Exploiting the power of information theoretical measures…
The leverage effect-- the correlation between an asset's return and its volatility-- has played a key role in forecasting and understanding volatility and risk. While it is a long standing consensus that leverage effects exist and improve…
We develop a nonparametric test for deciding whether volatility of an asset follows a standard semimartingale process, with paths of finite quadratic variation, or a rough process with paths of infinite quadratic variation. The test…
We consider a few quantities that characterize trading on a stock market in a fixed time interval: logarithmic returns, volatility, trading activity (i.e., the number of transactions), and volume traded. We search for the power-law…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
We prove that a wide class of correlated stochastic volatility models exactly measure an empirical fact in which past returns are anticorrelated with future volatilities: the so-called ``leverage effect''. This quantitative measure allows…
Over the past 60 years, there has been a gradual increase in the volatility of daily returns for the S&P 500 Index. Hypothetically, suppose that market forces determine daily volatility such that a daily leveraged S&P 500 fund cannot…
This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…
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…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
This paper designs a statistical quantification towards the intermittent power uncertainty in power systems. A negative-exponential forecast uncertainty function is constructed to represent the relationship between the statistics of…
We propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a…