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We conduct modeling of the price dynamics following order flow imbalance in market microstructure and apply the model to the analysis of Chinese CSI 300 Index Futures. There are three findings. The first is that the order flow imbalance is…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
Fractional statistics and quantum chaos are both phenomena associated with the non-local storage of quantum information. In this article, we point out a connection between the butterfly effect in (1+1)-dimensional rational conformal field…
We present a general framework for a comparative theory of variability measures, with a particular focus on the recently introduced one-parameter families of inter-Expected Shortfall differences and inter-expectile differences, that are…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
Financial time series exhibit a number of interesting properties that are difficult to explain with simple models. These properties include fat-tails in the distribution of price fluctuations (or returns) that are slowly removed at longer…
The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may…
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…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
As data plays an increasingly pivotal role in decision-making, the emergence of data markets underscores the growing importance of data valuation. Within the machine learning landscape, Data Shapley stands out as a widely embraced method…
Walrasian equilibrium prices can be said to coordinate markets: They support a welfare optimal allocation in which each buyer is buying bundle of goods that is individually most preferred. However, this clean story has two caveats. First,…
Recent studies on fully dielectric multilayered metamaterials have shown that the negligibly small nonlocal effects (spatial dispersion) typically observed in the limit of deeply subwavelength layers may be significantly enhanced by…
We study the problem of what causes prices to change. We define the mechanical impact of a trading order as the change in future prices in the absence of any future changes in decision making, and its it informational impact as the…
Do price regulations lead to inefficiencies and trade loss? The answer depends on the type of regulation, monetary and non-monetary factors influencing demand, technological factors affecting supply elasticities, difference between…
We empirically study the market impact of trading orders. We are specifically interested in large trading orders that are executed incrementally, which we call hidden orders. These are reconstructed based on information about market member…
In many areas of engineering and sciences, decision rules and control strategies are usually designed based on nominal values of relevant system parameters. To ensure that a control strategy or decision rule will work properly when the…
We evoke the idea of representation of the chaotic attractor by the set of unstable periodic orbits and disclose a novel noise-induced ordering phenomenon. For long unstable periodic orbits forming the strange attractor the weights (or…
Price controls kill the incentive for arbitrage. We prove a Chaos Theorem: under a binding price ceiling, suppliers are indifferent across destinations, so arbitrarily small cost differences can determine the entire allocation. The economy…
This paper introduces nonparametric econometric methods that characterize general power law distributions under basic stability conditions. These methods extend the literature on power laws in the social sciences in several directions.…