Related papers: Recurrent Stochastic Fluctuations with Financial S…
The Great Recession highlighted the role of financial and uncertainty shocks as drivers of business cycle fluctuations. However, the fact that uncertainty shocks may affect economic activity by tightening financial conditions makes…
Financial bubbles and crashes have repeatedly caused economic turmoil notably but not only during the 2008 financial crisis. However, both in the popular press as well as scientific publications, the meaning of bubble is sometimes…
The speculation game is an agent-based toy model to investigate the dynamics of the financial market. Our model has achieved the reproduction of 10 of the well-known stylized facts for financial time series. However, there is also a…
We propose a novel explanation for classic international macro puzzles regarding capital flows and portfolio investment, which builds on modern macro-finance models of experience-based belief formation. Individual experiences of past…
In order to emphasize cross-correlations for fluctuations in major market places, series of up and down spins are built from financial data. Patterns frequencies are measured, and statistical tests performed. Strong cross-correlations are…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…
We show that recent stock market fluctuations are characterized by the cumulative distributions whose tails on short, minute time scales exhibit power scaling with the scaling index alpha > 3 and this index tends to increase quickly with…
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.…
This is the transcript of a talk given at the 1992 Complex Systems Summer School. The theory of large fluctuations of stochastically perturbed continuous-time dynamical systems is reviewed, and the large fluctuations of two stochastic…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
We introduce a mathematical model on the dynamics of demand and supply incorporating collectability and saturation factors. Our analysis shows that when the fluctuation of the determinants of demand and supply is strong enough, there is…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…
Exerting fluctuations is a part of our daily life: traffic noise, heartbeat, opinion poll, currency exchange rate, electrical current, chemical reactions - they all permanently fluctuate. One of the most important questions is why the…
We introduce a new stochastic model for the variations of asset prices at the tick-by-tick level in dimension 1 (for a single asset) and 2 (for a pair of assets). The construction is based on marked point processes and relies on linear self…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
We define a financial bubble as a period of unsustainable growth, when the price of an asset increases ever more quickly, in a series of accelerating phases of corrections and rebounds. More technically, during a bubble phase, the price…
We show that the simplest stochastic epidemiological models with spatial correlations exhibit two types of oscillatory behaviour in the endemic phase. In a large parameter range, the oscillations are due to resonant amplification of…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…