Related papers: Foreign exchange markets: price response and sprea…
We introduce an autoregressive-type model of prices in financial market taking into account the self-modulation effect. We find that traders are mainly using strategies with weighted feedbacks of past prices. These feedbacks are responsible…
In a financial exchange, market impact is a measure of the price change of an asset following a transaction. This is an important element of market microstructure, which determines the behaviour of the market following a trade. In this…
We investigate intra-day foreign exchange (FX) time series using the inverse statistic analysis developed in [1,2]. Specifically, we study the time-averaged distributions of waiting times needed to obtain a certain increase (decrease)…
We construct a price impact model between stocks in a correlated market. For the price change of a given stock induced by the short-run liquidity of this stock itself and of the information about other stocks, we introduce a self- and a…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
This paper performs the numerical analysis and the computation of a Spread option in a market with imperfect liquidity. The number of shares traded in the stock market has a direct impact on the stock's price. Thus, we consider a…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
In this paper we test the random walk hypothesis on the high frequency dataset of the bid--ask Deutschemark/US dollar exchange rate quotes registered by the inter-bank Reuters network over the period October 1, 1992 to September 30, 1993.…
In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore…
Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…
It is shown that prize changes of the US dollar - German Mark exchange rates upon different delay times can be regarded as a stochastic Marcovian process. Furthermore we show that from the empirical data the Kramers-Moyal coefficients can…
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and…
We compare the predictions of the stationary Kyle model, a microfounded multi-step linear price impact model in which market prices forecast fundamentals through information encoded in the order flow, with those of the propagator model, a…
We analyze waiting times for price changes in a foreign currency exchange rate. Recent empirical studies of high frequency financial data support that trades in financial markets do not follow a Poisson process and the waiting times between…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
By applying the multifractal detrended fluctuation analysis to the high-frequency tick-by-tick data from Deutsche B\"orse both in the price and in the time domains, we investigate multifractal properties of the time series of logarithmic…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Dealers in foreign exchange markets provide bid and ask prices to their clients at which they are happy to buy and sell, respectively. To manage risk, dealers can skew their quotes and hedge in the interbank market. Hedging offers certainty…
We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen-dollar rate, the dollar-euro rate and the yen-euro rate. Next, we propose a model of…