Related papers: A Classical Model of Speculative Asset Price Dynam…
It has become the default in markets such as ad auctions for participants to bid in an auction through automated bidding agents (autobidders) which adjust bids over time to satisfy return-over-spend constraints. Despite the prominence of…
Researchers are more likely to share notable findings. As a result, published findings tend to overstate the magnitude of real-world phenomena. This bias is a natural concern for asset pricing research, which has found hundreds of return…
Experimental results on market behavior establish a lower stability and efficiency of markets for durable re-tradable assets compared to markets for non-durable, or perishable, goods. In this chapter, we revisit this known but…
Stochastic volatility models describe asset prices $S_t$ as driven by an unobserved process capturing the random dynamics of volatility $\sigma_t$. Here, we quantify how much information about $\sigma_t$ can be inferred from asset prices…
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 work we afford the statistical characterization of a linear Stochastic Volatility Model featuring Inverse Gamma stationary distribution for the instantaneous volatility. We detail the derivation of the moments of the return…
We introduce a minimal Agent Based Model with two classes of agents, fundamentalists (stabilizing) and chartists (destabilizing) and we focus on the essential features which can generate the stylized facts. This leads to a detailed…
Employing a recent technique which allows the representation of nonstationary data by means of a juxtaposition of locally stationary patches of different length, we introduce a comprehensive analysis of the key observables in a financial…
In this paper we introduce a simple model for a financial market characterized by a single stock or good and an interplay between two different traders populations, chartists and fundamentalists, which determine the price dynamic of the…
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…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
A dynamical price formation model for financial assets is presented. It aims to capture the essence of speculative trading where mispricings of assets are used to make profits. It is shown that together with the incorporation of the concept…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
We suggest an original physical approach to describe the mechanism of market pricing. The core of our approach is to consider pricing at different time scales separately, using independent equations of motion. Such an approach leads to a…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
The analysis of financial markets using models inspired by statistical physics offers a fruitful approach to understand collective and extreme phenomena [3, 14, 15] In this paper, we present a study based on a 2D Ising network model where…
We study the dynamics of exchange value in a system composed of many interacting agents. The simple model we propose exhibits cooperative emergence and collapse of global value for individual goods. We demonstrate that the demand that…
We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on…
We analyze quantitatively the effect of spurious multifractality induced by the presence of fat-tailed symmetric and asymmetric probability distributions of fluctuations in time series. In the presented approach different kinds of symmetric…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…