Related papers: Indian Derivatives Market Evolution and Challenge
We show, by studying in detail the market prices of options on liquid markets, that the market has empirically corrected the simple, but inadequate Black-Scholes formula to account for two important statistical features of asset…
Commodity exchange-traded funds (ETFs) are a significant part of the rapidly growing ETF market. They have become popular in recent years as they provide investors access to a great variety of commodities, ranging from precious metals to…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…
Let $S^F$ be a $\mathbb{P}$-martingale representing the price of a primitive asset in an incomplete market framework. We present easily verifiable conditions on model coefficients which guarantee the completeness of the market in which in…
The passive management approach offers conservative investors a way to reduce risk concerning the market. This investment strategy aims at replicating a specific index, such as the NASDAQ Composite or the FTSE100 index. The problem is that…
Decisions taken in our everyday lives are based on a wide variety of information so it is generally very difficult to assess what are the strategies that guide us. Stock market therefore provides a rich environment to study how people take…
We report empirical evidences on the existence of a conditional dynamics driving the evolution of financial assets which is found in several markets around the world and for different historical periods. In particular, we have analyzed the…
There is substantial empirical evidence showing the fundamental portfolio outperforming the market portfolio. Here a theoretical foundation is laid that supports this empirical research. Assuming stock prices revert around fundamental…
Prediction models are crucial in the stock market as they aid in forecasting future prices and trends, enabling investors to make informed decisions and manage risks more effectively. In the Indian stock market, where volatility is often…
This study examines active liquidity management by Indian open-ended equity mutual funds. We find that fund managers respond to inflows by increasing cash holdings, which are later used to purchase less-liquid stocks at favourable…
In econometrics, the Efficient Market Hypothesis posits that asset prices reflect all available information in the market. Several empirical investigations show that market efficiency drops when it undergoes extreme events. Many models for…
The Black-Scholes-Merton model is a mathematical model for the dynamics of a financial market that includes derivative investment instruments, and its formula provides a theoretical price estimate of European-style options. The model's…
Efficient computability is an important property of solution concepts in matching markets. We consider the computational complexity of finding and verifying various solution concepts in trading networks-multi-sided matching markets with…
In this paper we investigate the adaptive market efficiency of the agricultural commodity futures market, using a sample of eight futures contracts. Using a battery of nonlinear tests, we uncover the nonlinear serial dependence in the…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
An extension of the idea of state tameness is presented in a dynamic framework. The proposed model for financial markets is rich enough to provide analytical tools that are mostly obtained in models that arise as the solution of SDEs with…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We decompose returns for portfolios of bottom-ranked, lower-priced assets relative to the market into rank crossovers and changes in the relative price of those bottom-ranked assets. This decomposition is general and consistent with…
We consider an equity market subject to risk from both unhedgeable shocks and default. The novelty of our work is that to partially offset default risk, investors may dynamically trade in a credit default swap (CDS) market. Assuming…