Related papers: Metastable Financial Markets
In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…
We investigate the behavior of systems of interacting diffusion processes, known as volatility-stabilized market models in the mathematical finance literature, when the number of diffusions tends to infinity. We show that, after an…
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
Random metastability occurs when an externally forced or noisy system possesses more than one state of apparent equilibrium. This work investigates fluctuations in a class of random dynamical systems, arising from randomly perturbing a…
A definition of metastable states applicable to arbitrary finite state Markov processes satisfying detailed balance is discussed. In particular, we identify a crucial condition that distinguishes genuine metastable states from other types…
We study a class of Markov chains that describe reversible stochastic dynamics of a large class of disordered mean field models at low temperatures. Our main purpose is to give a precise relation between the metastable time scales in the…
The financial markets are understood as complex dynamical systems whose dynamics is analysed mostly using nonstationary and brief data sets that usually come from stock markets. For such data sets, a reliable method of analysis is based on…
Motivated by empirical observations on the interplay of trends and reversion, a lattice gas model of financial markets is presented. The shares of an asset are modeled by gas molecules that are distributed across a hidden social network of…
We study symmetric queuing networks with moving servers and FIFO service discipline. The mean-field limit dynamics demonstrates unexpected behavior which we attribute to the meta-stability phenomenon. Large enough finite symmetric networks…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
A simple spin model is studied, motivated by the dynamics of traders in a market where expectation bubbles and crashes occur. The dynamics is governed by interactions which are frustrated across different scales: While ferromagnetic…
The minority game (MG) model introduced recently provides promising insights into the understanding of the evolution of prices, indices and rates in the financial markets. In this paper we perform a time series analysis of the model…
Price fluctuations in financial markets can be characterized by L\'evy's stable distribution, which is supported by the generalized central limit system. When the stable parameters were estimated from four different stock markets in long…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
The principal aim of this work is the evidence on empirical way that catastrophic bifurcation breakdowns or transitions, proceeded by flickering phenomenon, are present on notoriously significant and unpredictable financial markets.…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
Modeling the dynamics of non-stationary stochastic systems requires balancing the representational power of deep learning with the mathematical transparency of classical models. While classical Markov transition operators provide explicit,…