Related papers: Market-Based Asset Price Probability
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
This paper describes asset price and return disturbances as result of relations between transactions and multiple kinds of expectations. We show that disturbances of expectations can cause fluctuations of trade volume, price and return. We…
It has been long that literature in financial academics focuses mainly on price and return but much less on trading volume. In the past twenty years, it has already linked both price and trading volume to economic fundamentals, and explored…
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…
We discuss the economic reasons why the predictions of price and return statistical moments in the coming decades, in the best case, will be limited by their averages and volatilities. That limits the accuracy of the forecasts of price and…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
Motivated by how transaction amount constrain trading volume and price volatility in stock market, we, in this paper, study the relation between volume and price if amount of transaction is given. We find that accumulative trading volume…
Financial markets are a source of non-stationary multidimensional time series which has been drawing attention for decades. Each financial instrument has its specific changing-over-time properties, making its analysis a complex task. Hence,…
The market impact (MI) of Volume Weighted Average Price (VWAP) orders is a convex function of a trading rate, but most empirical estimates of transaction cost are concave functions. How is this possible? We show that isochronic (constant…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
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…
The Capital Asset Pricing Model (CAPM) relates a well-diversified stock portfolio to a benchmark portfolio. We insert size effect in CAPM, capturing the observation that small stocks have higher risk and return than large stocks, on…
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 empirically analyze the price and liquidity responses to trade signs, traded volumes and signed traded volumes. Utilizing the singular value decomposition, we explore the interconnections of price responses and of liquidity responses…
We discuss the probabilistic properties of the variation based third and fourth moments of financial returns as estimators of the actual moments of the return distributions. The moment variations are defined under non-parametric assumptions…
We study the dependence of volatility on the stock price in the stochastic volatility framework on the example of the Heston model. To be more specific, we consider the conditional expectation of variance (square of volatility) under fixed…
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…
Building on a prominent agent-based model, we present a new structural stochastic volatility asset pricing model of fundamentalists vs. chartists where the prices are determined based on excess demand. Specifically, this allows for…
A simple spin system is constructed to simulate dynamics of asset prices and studied numerically. The outcome for the distribution of prices is shown to depend both on the dimension of the system and the introduction of price into the link…
We use the statistical properties of Shannon entropy estimator and Kullback-Leibler divergence to study the predictability of ultra-high frequency financial data. We develop a statistical test for the predictability of a sequence based on…