Related papers: Market-Based Price Autocorrelation
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including electric power markets and the power systems they intend to govern. Market-based control is founded on the conjecture that…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
The finding of small price changes in many retail price datasets is often viewed as a puzzle. We show that a possible explanation for the presence of small price changes is related to sales volume, an observation that has been overlooked in…
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including power markets and the power systems they intend to govern. Transaction-based control is founded on the conjecture that the…
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…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own…
We investigated distributions of short term price trends for high frequency stock market data. A number of trends as a function of their lengths was measured. We found that such a distribution does not fit to results following from an…
This paper considers the asset price p as relations C=pV between the value C and the volume V of the executed transactions and studies the consequences of this definition for the option pricing equations. We show that the classical BSM…
The Price equation partitions the change in the expected value of a population measure. The first component describes the partial change caused by altered frequencies. The second component describes the partial change caused by altered…
The observation of power laws in the time to extrema of volatility, volume and intertrade times, from milliseconds to years, are shown to result straightforwardly from the selection of biased statistical subsets of realizations in otherwise…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
Assuming that price of the underlying stock is moving in range bound, the Black-Scholes formula for options pricing supports a separation of variables. The resulting time-independent equation is solved employing different behavior of the…
No-arbitrage models of term structure have the feature that the return on zero-coupon bonds is the sum of the short rate and the product of volatility and market price of risk. Well known models restrict the behavior of the market price of…
This paper develops a strategic model of trade between two regions in which, depending on the relation among output, financial resources and transportation costs, the adjustment of prices towards an equilibrium is studied. We derive…
In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and…
We present an empirical study of the subordination hypothesis for a stochastic time series of a stock price. The fluctuating rate of trading is identified with the stochastic variance of the stock price, as in the continuous-time random…