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Stock prices often react sluggishly to news, producing gradual jumps and jump delays. Econometricians typically treat these sluggish reactions as microstructure effects and settle for a coarse sampling grid to guard against them.…
Basic peculiarities of market price fluctuations are known to be well described by a recently developed random walk model in a temporally deforming quadric potential force whose center is given by a moving average of past price traces…
We study the behavior of U.S. markets both before and after U.S. Federal Open Market Committee (FOMC) meetings, and show that the announcement of a U.S. Federal Reserve rate change causes a financial shock, where the dynamics after the…
Cellular decision making is based on regulatory circuits that associate signal thresholds to specific physiological actions. This transmission of information is subjected to molecular noise what can decrease its fidelity. Here, we show…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
Contingent Convertible bonds (CoCos) are debt instruments that convert into equity or are written down in times of distress. Existing pricing models assume conversion triggers based on market prices and on the assumption that markets can…
The new digital revolution of big data is deeply changing our capability of understanding society and forecasting the outcome of many social and economic systems. Unfortunately, information can be very heterogeneous in the importance,…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
It is generally accepted that the asset price processes contain jumps. In fact, pure jump models have been widely used to model asset prices and/or stochastic volatilities. The question is: is there any statistical evidence from the…
We conduct a tone-based event study to examine the aggregate abnormal tone dynamics in media articles around earnings announcements. We test whether they convey incremental information that is useful for price discovery for nonfinancial S&P…
The paper investigates the effect of the label green in bond markets from the lens of the trading activity. The idea is that jumps in the dynamics of returns have a specific memory nature that can be well represented through a self-exciting…
We focus on the problem of market making in high-frequency trading. Market making is a critical function in financial markets that involves providing liquidity by buying and selling assets. However, the increasing complexity of financial…
We use the statistical properties of Shannon entropy estimator and Kullback-Leibler divergence to study the predictability of ultra-high frequency financial data. We develop a statistical test for the predictability of a sequence based on…
Correlations between random variables play an important role in applications, e.g.\ in financial analysis. More precisely, accurate estimates of the correlation between financial returns are crucial in portfolio management. In particular,…
We present a careful analysis of possible issues on the application of the self-excited Hawkes process to high-frequency financial data. We carefully analyze a set of effects leading to significant biases in the estimation of the…
We achieve two primary goals in this work. First, we propose a flexible algorithm that can simulate various scenarios of state/government intervention. Secondly, we analyze the scenario exhibiting the critical behavior of the market of…
Contextual dynamic pricing aims to set personalized prices based on sequential interactions with customers. At each time period, a customer who is interested in purchasing a product comes to the platform. The customer's valuation for the…
The information released to investors in financial markets has various forms. We refer to range information as information about the upper and lower bound which the payoff of a risky asset may reach in the future. This study develops…