Related papers: FX Market Volatility
If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX)…
We amend and extend the Chiarella model of financial markets to deal with arbitrary long-term value drifts in a consistent way. This allows us to improve upon existing calibration schemes, opening the possibility of calibrating individual…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
The Heston model stands out from the class of stochastic volatility (SV) models mainly for two reasons. Firstly, the process for the volatility is non-negative and mean-reverting, which is what we observe in the markets. Secondly, there…
This work examines a stochastic volatility model with double-exponential jumps in the context of option pricing. The model has been considered in previous research articles, but no thorough analysis has been conducted to study its quality…
In this note we investigate the consistency under inversion of jump diffusion processes in the Foreign Exchange (FX) market. In other terms, if the EUR/USD FX rate follows a given type of dynamics, under which conditions will USD/EUR follow…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
This paper presents a novel study on gas-like models for economic systems. The interacting agents and the amount of exchanged money at each trade are selected with different levels of randomness, from a purely random way to a more chaotic…
Flexible algorithm of multicurrency trade on Forex market has been built on the grounds of non-linear stochastic wavelets (NSW) model. Probability of the loss-free trade has been evaluated. Results of the algorithm's real-time testing and…
An algorithmic stablecoin is a type of cryptocurrency managed by algorithms (i.e., smart contracts) to dynamically minimize the volatility of its price relative to a specific form of asset, e.g., US dollar. As algorithmic stablecoins have…
Monitoring downside risk and upside risk to the key macroeconomic indicators is critical for effective policymaking aimed at maintaining economic stability. In this paper I propose a parametric framework for modelling and forecasting…
A quantitative check of weak efficiency in US dollar/German mark exchange rates is developed using high frequency data. We show the existence of long term return anomalies. We introduce a technique to measure the available information and…
The statistical description and modeling of volatility plays a prominent role in econometrics, risk management and finance. GARCH and stochastic volatility models have been extensively studied and are routinely fitted to market data, albeit…
In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…
This paper proposes swaps on two important new measures of generalized variance, namely the maximum eigen-value and trace of the covariance matrix of the assets involved. We price these generalized variance swaps for financial markets with…
Cryptocurrencies fluctuate in markets with high price volatility, posing significant challenges for investors. To aid in informed decision-making, systems predicting cryptocurrency market movements have been developed, typically focusing on…
The modeling of complex systems such as ecological or socio-economic systems can be very challenging. Although various modeling approaches exist, they are generally not compatible and mutually consistent, and empirical data often do not…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
Agents' heterogeneity is recognized as a driver mechanism for the persistence of financial volatility. We focus on the multiplicity of investment strategies' horizons, we embed this concept in a continuous time stochastic volatility…
The SABR model is shortly presented and the volatility swap explained. The fair value for a volatility swap is then computed using the usual theory in financial mathematics. An analytical solution using confluent hypergeometric functions is…