Related papers: Asset Trading in Continuous Time: A Cautionary Tal…
The time development of the price of a financial asset is considered by constructing and solving Langevin equations for a homogeneously saturated model, and for comparison, for a standard model and for a logistic model. The homogeneously…
The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from…
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…
Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has…
This paper considers time-inconsistent problems when control and stopping strategies are required to be made simultaneously (called stopping control problems by us). We first formulate the timeinconsistent stopping control problems under…
We consider a stochastic game-theoretic model of an investment market in continuous time with short-lived assets and study strategies, called survival, which guarantee that the relative wealth of an investor who uses such a strategy remains…
This paper considers the constrained portfolio optimization in a generalized life-cycle model. The individual with a stochastic income manages a portfolio consisting of stocks, a bond, and life insurance to maximize his or her consumption…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
We conclude from an analysis of high resolution NYSE data that the distribution of the traded value $f_i$ (or volume) has a finite variance $\sigma_i$ for the very large majority of stocks $i$, and the distribution itself is non-universal…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
Correlations between asset returns are important in many financial applications. In recent years, multivariate volatility models have been used to describe the time-varying feature of the correlations. However, the curse of dimensionality…
In the paper discrete time shadow price is constructed for the market with several assets with given bid and ask prices. Shadow price is the price such that the problem of optimal utility from terminal wealth on the market without…
We postulates, and then show experimentally, that liquidity deficit is the driving force of the markets. In the first part of the paper a kinematic of liquidity deficit is developed. The calculus-like approach, which is based on…
Continuous time random walks (CTRWs) are used in physics to model anomalous diffusion, by incorporating a random waiting time between particle jumps. In finance, the particle jumps are log-returns and the waiting times measure delay between…
In life insurance contracts, benefits and premiums are typically paid contingent on the biometric state of the insured. Due to delays between the occurrence, reporting, and settlement of changes to the biometric state, the state process is…
Classic market design theory is rooted in static models where all participants trade simultaneously. In contrast, modern platform-mediated digital markets are fundamentally dynamic, defined by the asynchronous and stochastic arrival of…
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy.…
Continuous time random Walk model has been versatile analytical formalism for studying and modeling diffusion processes in heterogeneous structures, such as disordered or porous media. We are studying the continuous limits of Heterogeneous…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…