Related papers: FX Market Volatility
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
A new stochastic theory of a foreign exchange markets dynamics is developed. As a result we have the new probability distribution which well describes statistical and scaling dependencies ''experimentally'' observed in foreign exchange…
We introduce a statistical test for simultaneous jumps in the price of a financial asset and its volatility process. The proposed test is based on high-frequency data and is robust to market microstructure frictions. For the test, local…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving…
This study provides a consistent and efficient pricing method for both Standard & Poor's 500 Index (SPX) options and the Chicago Board Options Exchange's Volatility Index (VIX) options under a multiscale stochastic volatility model. To…
We discuss and analyze some recent literature that introduced pioneering methods in econophysics. In doing so, we review recent methods of estimating the volatility, volatility of volatility, and probability densities. These methods will…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…
Analogies between the price dynamics in the foreign exchange market and 3-dimensional fully developed turbulence were recently presented in Nature vol. 381, 767-769 (1996). Independently, we have carried out a study comparing the parallel…
Robustness of linear systems with constant coefficients is considered. There exist methods and tools for analyzing the stability of systems with random or deterministic uncertainties. At the same time, there are no approaches for the…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
High-frequency financial data of the foreign exchange market (EUR/CHF, EUR/GBP, EUR/JPY, EUR/NOK, EUR/SEK, EUR/USD, NZD/USD, USD/CAD, USD/CHF, USD/JPY, USD/NOK, and USD/SEK) are analyzed by utilizing the Kullback-Leibler divergence between…
By treating the financial market as a thermodynamic system, we establish a one-to-one correspondence between thermodynamic variables and economic quantities. Measured by the expected loss under the worst-case scenario, financial risk caused…
We consider a novel use case for the Double Heston model (Christoffersen et al,, 2009), where the two Heston sub-variances have different spot/volatility correlations but the same volatility of volatility and mean reversion speed. This…
We use techniques from network science to study correlations in the foreign exchange (FX) market over the period 1991--2008. We consider an FX market network in which each node represents an exchange rate and each weighted edge represents a…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
During a financial crisis, the capital markets network frequently exhibits a high correlation between returns. We developed a network analysis framework based on daily returns from 42 countries to determine systemic stability. Our network…
In todays global economy, accuracy in predicting macro-economic parameters such as the foreign the exchange rate or at least estimating the trend correctly is of key importance for any future investment. In recent times, the use of…
An interesting analog circuit for simulating a signal with fluctuations having a probability density function with a power tail has recently been proposed and constructed. The exponent of the power law can be fixed by tuning an appropriate…