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The distribution of returns in financial time series exhibits heavy tails. In empirical studies, it has been found that gaps between the orders in the order book lead to large price shifts and thereby to these heavy tails. We set up an…
With the increasing penetration of intermittent renewable energy sources (RESs), it becomes increasingly challenging to maintain the supply-demand balance of power systems by solely relying on the generation side. To combat the volatility…
In relativistic heavy-ion collisions, properties of the initial state and effects arising during evolution of the medium, such as a transition between the hadronic and partonic phases, should reflect themselves in event-by-event…
We respond to the issues discussed by Farmer and Lillo (FL) related to our proposed approach to understanding the origin of power-law distributions in stock price fluctuations. First, we extend our previous analysis to 1000 US stocks and…
The paper analyzes the mathematics of the relationship between the default risk and yield-to-maturity of a coupon bond. It is shown that the yield-to-maturity is driven not only by the default probability and recovery rate of the bond but…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
We study an agent-based stock market model with heterogeneous agents and friction. Our model is based on that of Foellmer-Schweizer(1993): The process of a stock price in a discrete-time framework is determined by temporary equilibria via…
We develop a fundamentally different stochastic dynamic programming model of trading costs. Built on a strong theoretical foundation, our model provides insights to market participants by splitting the overall move of the security price…
We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…
We study superreplication of European contingent claims in discrete time in a large trader model with market indifference prices recently proposed by Bank and Kramkov. We introduce a suitable notion of efficient friction in this framework,…
This study introduces a new technique to recover the implicit discount factor in the derivative market using only European put and call prices: this discount is grounded in actual transactions in active markets. Moreover, this study…
The energetic flexibility of electric energy resources can be exploited when trading on wholesale energy and ancillary service markets. This paper considers the problem of a Balance Responsible Party to maximize its profit from trading on…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
This paper investigates the impact of Trade Policy Uncertainty (TPU) on stock-bond correlation dynamics in the United States. Using daily data on major U.S. stock indices and the 10-year Treasury bond from 2015 to 2025, we estimate…
This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset…
Oil markets profoundly influence world economies through determination of prices of energy and transports. Using novel methodology devised in frequency domain, we study the information transmission mechanisms in oil-based commodity markets.…
Friction is fundamental to mechanical stability across scales, from geological faults and architectural structures to granular materials and animal feet. We study the mechanical stability of a minimal friction-stabilized structure composed…
Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads…
In this paper, we explore some stylized facts of the Bitcoin market using the BTC-USD exchange rate time series of historical intraday data from 2013 to 2020. Bitcoin presents some very peculiar idiosyncrasies, like the absence of…
This paper analyzes the role of money in asset markets characterized by search frictions. We develop a dynamic framework that brings together a model for illiquid financial assets `a la Duffie, Garleanu, and Pedersen, and a search-theoretic…