Related papers: Foreign exchange markets: price response and sprea…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
This study proposes a versatile model for the dynamics of the best bid and ask prices using an extended Hawkes process. The model incorporates the zero intensities of the spread-narrowing processes at the minimum bid-ask spread,…
The electricity market is threatened by supply scarcity, which may lead to very sharp price spikes in the spot market. On the other hand, demand-side's activities could effectively mitigate the supply scarcity and absorb most of these…
The common wisdom argues that, in general, large trades cause large price changes, while small trades cause small price changes. However, for extremely large price changes, the trade size and news play a minor role, while the liquidity…
By incorporating market impact and momentum traders into an agent-based model, we investigate the conditions for the occurrence of self-reinforcing feedback loops and the coevolutionary mechanism of prices and strategies. For low market…
In this paper we compare market price fluctuations with the response to fundamental price drops within the Lux-Marchesi model which is able to reproduce the most important stylized facts of real market data. Major differences can be…
For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
In this paper, we derive and analyze a continuous of a binary option market with exogenous information. The resulting non-linear system has a discontinuous right hand side, which can be analyzed using zero-dimensional Filippov surfaces.…
During a speculative episode the price of an item jumps from an initial level p_1 to a peak level p_2 before more or less returning to level p_1. The ratio p_2/p_1 is referred to as the amplitude A of the peak. This paper shows that for a…
We derived similar to Bo et al. (2010) results but in the case when the dynamics of the FX rate is driven by a general Merton jump-diffusion process. The main results of our paper are as follows: 1) formulas for the Esscher transform…
We introduce a new model in order to describe the fluctuation of tick-by-tick financial time series. Our model, based on marked point process, allows us to incorporate in a unique process the duration of the transaction and the…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
We consider issues of time in automated trading strategies in simulated financial markets containing a single exchange with public limit order book and continuous double auction matching. In particular, we explore two effects: (i) reaction…
We investigate the relative market efficiency in financial market data, using the approximate entropy(ApEn) method for a quantification of randomness in time series. We used the global foreign exchange market indices for 17 countries during…
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…