Related papers: On a universal mechanism for long ranged volatilit…
We consider the effects of long-range temporal correlations in many-particle systems, focusing particularly on fluctuations about the typical behaviour. For a specific class of memory dependence we discuss the modification of the large…
In spite of the (correct) common-wisdom statement correlation does not imply causation, a proper employ of time correlations and of fluctuation-response theory allows to understand the causal relations between the variables of a…
In the seminal work [9], several macroscopic market observables have been introduced, in an attempt to find characteristics capturing the diversity of a financial market. Despite the crucial importance of such observables for investment…
In order to pursue the issue of the relation between the financial cross-correlations and the conventional Random Matrix Theory we analyse several characteristics of the stock market correlation matrices like the distribution of…
We use a continuous-time random walk (CTRW) to model market fluctuation data from times when traders experience excessive losses or excessive profits. We analytically derive "superstatistics" that accurately model empirical market activity…
Game theory relies heavily on the availability of cardinal utility functions, but in fields such as matching markets, only ordinal preferences are typically elicited. The literature focuses on mechanisms with simple dominant strategies, but…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…
For the same quantum field theory distinct effective actions can be obtained by coupling sources to different choices of field variables. This is the same as considering effective actions for theories related by a change of variables and…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
Quantum theory is used to model secondary financial markets. Contrary to stochastic descriptions, the formalism emphasizes the importance of trading in determining the value of a security. All possible realizations of investors holding…
Financial transactions constitute connections between entities and through these connections a large scale heterogeneous weighted graph is formulated. In this labyrinth of interactions that are continuously updated, there exists a variety…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
We present a new volatility model, simple to implement, that includes a leverage effect whose return-volatility correlation function fits to empirical observations. This model is able to capture both the "retarded effect" induced by the…
We present a reactive beta model that includes the leverage effect to allow hedge fund managers to target a near-zero beta for market neutral strategies. For this purpose, we derive a metric of correlation with leverage effect to identify…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management…
This paper concerns the long-term behaviour of a system of interacting random walks labeled by vertices of a finite graph. The model is reversible which allows to use the method of electric networks in the study. In addition, examples of…
This paper introduces a global stock market volatility forecasting model that enhances forecasting accuracy and practical utility in real-world financial decision-making by integrating dynamic graph structures and encompassing all active…
Small random perturbations may have a dramatic impact on the long time evolution of dynamical systems, and large deviation theory is often the right theoretical framework to understand these effects. At the core of the theory lies the…
We provide a theoretical description of the Minority Game in terms of crowd effects. The size of the fluctuations arising in the game is controlled by the interplay between crowds of like-minded agents and their anti-correlated partners…
Starting from the Minority Game and building more and more sophisticated models of adaptive agents, we show that minority mechanisms underly any model where agents learn collectively a resource level that can be either obvious and constant…