Related papers: Market-Based Asset Price Probability
We study the closure properties of the class of Bivariate Regular Variation, symbolically BRV , in standard and nonstandard cases, with respect to the randomly weighted sums. However, we take into consideration a weak dependence structure…
We use the expectation of the range of an arithmetic Brownian motion and the method of moments on the daily high, low, opening and closing prices to estimate the volatility of the stock price. The daily price jump at the opening is…
In this paper we introduce a multilevel specification with stochastic volatility for repeated cross-sectional data. Modelling the time dynamics in repeated cross sections requires a suitable adaptation of the multilevel framework where the…
This paper sets out to provide a general framework for the pricing of average-type options via lower and upper bounds. This class of options includes Asian, basket and options on the volume-weighted average price. We demonstrate that in…
During a speculative episode the price of an item jumps from an initial level p_1 to a peak level p_2 before more or less returning to level p_1. The ratio p_2/p_1 is referred to as the amplitude A of the peak. This paper shows that for a…
In his famous paper, Markowitz (1952) derived the dependence of portfolio random returns on the random returns of its securities. This result allowed Markowitz to obtain his famous expression for portfolio variance. We show that Markowitz's…
We consider a simple stochastic differential equation for modeling bubbles in social context. A prime example is bubbles in asset pricing, but similar mechanisms may control a range of social phenomena driven by psychological factors (for…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
In this project, we investigate the accuracy of forecasting intraday and daily trading volume of the exchange-traded fund SPY. The ability to forecast volume over varying time intervals with high accuracy is a critical element to many…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
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 model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
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…
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…
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…
We present evidence that the best model for empirical volume-price distributions is not always the same and it strongly depends in (i) the region of the volume-price spectrum that one wants to model and (ii) the period in time that is being…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…