Related papers: A Stochastic Cascade Model for FX Dynamics
The paper models foreign capital inflow from the developed to the developing countries in a stochastic dynamic programming (SDP) framework. Under some regularity conditions, the existence of the solutions to the SDP problem is proved and…
This paper characterises dynamic linkages arising from shocks with heterogeneous degrees of persistence. Using frequency domain techniques, we introduce measures that identify smoothly varying links of a transitory and persistent nature.…
This paper investigates the structural dynamics of stock market volatility through the Financial Chaos Index, a tensor- and eigenvalue-based measure designed to capture realized volatility via mutual fluctuations among asset prices.…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
When the complete understanding of a complex system is not available, as, e.g., for systems considered in the real-world, we need a top-down approach to complexity. In this approach one may start with the desire to understand general…
We present a model of financial markets originally proposed for a turbulent flow, as a dynamic basis of its intermittent behavior. Time evolution of the price change is assumed to be described by Brownian motion in a power-law potential,…
Cascade models based on dynamical complex networks are proposed as models of turbulent energy cascade. Taking a simple shell model as the initial regular lattice with only nearest neighbor interactions, small world network models are…
We introduce a heterogeneous spatiotemporal GARCH model for geostatistical data or processes on networks, e.g., for modelling and predicting financial return volatility across firms in a latent spatial framework. The model combines…
This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of…
Stock markets can be characterized by fat tails in the volatility distribution, clustering of volatilities and slow decay of their time correlations. For an explanation models with several mechanisms and consequently many parameters as the…
Understanding the stochastic behavior of currency exchange rates is critical for assessing financial stability and anticipating market transitions. In this study, we investigate the empirical dynamics of the USD exchange rate in three…
A time-varying cointegration model for foreign exchange rates is presented. Unlike previous studies, we allow the loading matrix in the vector error correction (VEC) model to be varying over time. Because the loading matrix in the VEC model…
In this paper, we analyze the time-series of minute price returns on the Bitcoin market through the statistical models of generalized autoregressive conditional heteroskedasticity (GARCH) family. Several mathematical models have been…
Signals coming from multivariate higher order conditional moments as well as the information contained in exogenous covariates, can be effectively exploited by rational investors to allocate their wealth among different risky investment…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
Economic and financial time series can feature locally explosive behavior when a bubble is formed. The economic or financial bubble, especially its dynamics, is an intriguing topic that has been attracting longstanding attention. To…
In this note we investigate the consistency under inversion of jump diffusion processes in the Foreign Exchange (FX) market. In other terms, if the EUR/USD FX rate follows a given type of dynamics, under which conditions will USD/EUR follow…
The proposed model is aimed to reveal important patterns in the behavior of a simplified financial system. The patterns could be detected as regular cycles consisting of debt bubbles and crises. Financial cycles have a well defined…
A phenomenological turbulence model in which the energy spectrum obeys a nonlinear diffusion equation is presented. This equation respects the scaling properties of the original Navier-Stokes equations and it has the Kolmogorov -5/3 cascade…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…