Related papers: Metastable Financial Markets
There are two possible ways of interpreting the seemingly stochastic nature of financial markets: the Efficient Market Hypothesis (EMH) and a set of stylized facts that drive the behavior of the markets. We show evidence for some of the…
Throughout history, many countries have repeatedly experienced large swings in asset prices, which are usually accompanied by large fluctuations in macroeconomic activity. One of the characteristics of the period before major economic…
We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two…
In this paper we develop a novel hidden Markov graphical model to investigate time-varying interconnectedness between different financial markets. To identify conditional correlation structures under varying market conditions and…
Financial markets change their behaviours abruptly. The mean, variance and correlation patterns of stocks can vary dramatically, triggered by fundamental changes in macroeconomic variables, policies or regulations. A trader needs to adapt…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
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…
Price movements of stock market are not totally random. In fact, what drives the financial market and what pattern financial time series follows have long been the interest that attracts economists, mathematicians and most recently computer…
This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…
We consider a mean-field model of firms competing \`a la Cournot on a commodity market, where the commodity price is given in terms of a power inverse demand function of the industry-aggregate production. Investment is irreversible and…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
In the present paper a model of a market consisting of real and financial interacting sectors is studied. Agents populating the stock market are assumed to be not able to observe the true underlying fundamental, and their beliefs are biased…
We present an analytical model to study the role of expectation feedbacks and overlapping portfolios on systemic stability of financial systems. Building on [Corsi et al., 2016], we model a set of financial institutions having Value at Risk…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
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…
The low-frequency variability of the mid-latitude atmosphere involves complex nonlinear and chaotic dynamical processes posing predictability challenges. It is characterized by sporadically recurring, often long-lived patterns of…
We study short-horizon forecasting in financial time series under strict causal constraints, treating the market as a non-stationary stochastic system in which any predictive observable must be computable online from information available…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
It is widely accepted that there is strong persistence in the volatility of financial time series. The origin of the observed persistence, or long-range memory, is still an open problem as the observed phenomenon could be a spurious effect.…
In this letter we present a stochastic dynamic model which can explain economic cycles. We show that the macroscopic description yields a complex dynamical landscape consisting of multiple stable fixed points, each corresponding to a split…