Related papers: FX Market Volatility
The value of an asset in a financial market is given in terms of another asset known as numeraire. The dynamics of the value is non-stationary and hence, to quantify the relationships between different assets, one requires convenient…
Two major financial market complexities are transaction costs and uncertain volatility, and we analyze their joint impact on the problem of portfolio optimization. When volatility is constant, the transaction costs optimal investment…
Tracking the build-up of financial vulnerabilities is a key component of financial stability policy. Due to the complexity of the financial system, this task is daunting, and there have been several proposals on how to manage this goal. One…
Using a large dataset on major FX rates, we test the robustness of the rough fractional volatility model over different time scales, by including smoothing and measurement errors into the analysis. Our findings lead to new stylized facts in…
In financial mathematics, it is a typical approach to approximate financial markets operating in discrete time by continuous-time models such as the Black Scholes model. Fitting this model gives rise to difficulties due to the discrete…
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime…
We study recurrent patterns in volatility and volume for major cryptocurrencies, Bitcoin and Ether, using data from two centralized exchanges (Coinbase Pro and Binance) and a decentralized exchange (Uniswap V2). We find systematic patterns…
Reinforcement learning can interact with the environment and is suitable for applications in decision control systems. Therefore, we used the reinforcement learning method to establish a foreign exchange transaction, avoiding the…
In this article we model chaotic dynamics in financial markets by treating the market price, and market makers' inventory, as anharmonic oscillators with a nonlinear coupling. The market makers' risk appetite being the key parameter that…
Recently, the notion of cryptocurrencies has come to the fore of public interest. These assets that exist only in electronic form, with no underlying value, offer the owners some protection from tracking or seizure by government or…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Utilization of non-linear tools to characterize the state of development of the electricity markets in Italy and Greece. This is equivalent to testing the Efficient Market Hypothesis on these markets. The tools include a variety of…
Many financial and economic variables, including financial returns, exhibit nonlinear dependence, heterogeneity and heavy-tailedness. These properties may make problematic the analysis of (non-)efficiency and volatility clustering in…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
We investigate whether sophisticated volatility estimation improves the out-of-sample performance of mean-variance portfolio strategies relative to the naive 1/N strategy. The portfolio strategies rely solely upon second moments. Using a…
The decentralized international market of currency trading is a prototypical complex system having a highly heterogeneous composition. To understand the hierarchical structure relating the price movement of different currencies in the…
Selecting an appropriate statistical model to forecast exchange rates is still today a relevant issue for policymakers and central bankers. The so-called Meese and Rogoff puzzle assesses that exchange rate fluctuations are unpredictable. In…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
The financial crisis of 2007/08 caused catastrophic consequences and brought a bunch of changes around the world. Interest rates that were known to follow or behave similarly of each other diverged. Furthermore, the regulation and in…