Related papers: A Stochastic Cascade Model for FX Dynamics
In this paper, we show that the recent integration of statistical models with deep recurrent neural networks provides a new way of formulating volatility (the degree of variation of time series) models that have been widely used in time…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an…
A new approach to the understanding of complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a magnitude rooted in Kolmogorov-Chaitin theory is applied to…
Using intraday data for the cross-section of individual stocks, we show that both transitory and persistent fluctuations in realized market and average idiosyncratic volatility, skewness and kurtosis are differentially priced in the…
We propose a statistical model for weighted temporal networks capable of measuring the level of heterogeneity in a financial system. Our model focuses on the level of diversification of financial institutions; that is, whether they are more…
We introduce an event based framework of directional changes and overshoots to map continuous financial data into the so-called Intrinsic Network - a state based discretisation of intrinsically dissected time series. Defining a method for…
In agreement with the recent research findings in the econophysics, we propose that the nonlinear dynamic chaos can be generated by the turbulent capital flows in both the quantitative easing transmission channels and the transaction…
We model financial transactions as random walks on activity-driven temporal networks. By enforcing fund conservation, our framework analytically derives heavy-tailed distributions for the stationary balances and transaction sizes.…
We empirically analyze the scaling properties of daily Foreign Exchange rates, Stock Market indices and Bond futures across different financial markets. We study the scaling behaviour of the time series by using a generalized Hurst exponent…
This is a short review in honor of B. Mandelbrot's 80st birthday, to appear in W ilmott magazine. We discuss how multiplicative cascades and related multifractal ideas might be relevant to model the main statistical features of financial…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
A new approach to the understanding of the complex behavior of financial markets index using tools from thermodynamics and statistical physics is developed. Physical complexity, a magnitude rooted in the Kolmogorov-Chaitin theory is applied…
This systemic risk paper introduces inhomogeneous random financial networks (IRFNs). Such models are intended to describe parts, or the entirety, of a highly heterogeneous network of banks and their interconnections, in the global financial…
The lead-lag relationship plays a vital role in financial markets. It is the phenomenon where a certain price-series lags behind and partially replicates the movement of leading time-series. The present research proposes a new technique…
Turbulent dynamical systems are characterized by nonlinear interactions and stochastic effects that generate coupled statistical quantities, such as non-zero higher-order moments, which are difficult to capture from data with accuracy. We…
We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model synchronization effects, which generate large fluctuations in returns, can arise either from an…
Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…
The long time dynamics of large particles trapped in two inhomogeneous turbulent shear flows is studied experimentally. Both flows present a common feature, a shear region that separates two colliding circulations, but with different…
Periodically forced turbulence is used as a test case to evaluate the predictions of two-equation and multiple-scale turbulence models in unsteady flows. The limitations of the two-equation model are shown to originate in the basic…