Related papers: Levy Matrices and Financial Covariances
The LLS stock market model is a model of heterogeneous quasi-rational investors operating in a complex environment about which they have incomplete information. We review the main features of this model and several of its extensions. We…
In this paper, we apply tools from the random matrix theory (RMT) to estimates of correlations across volatility of various assets in the S&P 500. The volatility inputs are estimated by modeling price fluctuations as GARCH(1,1) process. The…
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 investigate relaxation and correlations in a class of mean-reverting models for stochastic variances. We derive closed-form expressions for the correlation functions and leverage for a general form of the stochastic term. We also discuss…
In this paper we perform robustness and sensitivity analysis of several continuous-time stochastic volatility (SV) models with respect to the process of market calibration. The analyses should validate the hypothesis on importance of the…
Volatility is a key measure of risk in financial analysis. The high volatility of one financial asset today could affect the volatility of another asset tomorrow. These lagged effects among volatilities - which we call volatility spillovers…
This paper develops new mathematical techniques to identify temporal shifts among a collection of US equities partitioned into a new and more detailed set of market sectors. Although conceptually related, our three analyses reveal distinct…
We study heavy-tailed Hermitian random matrices that are unitarily invariant. The invariance implies that the eigenvalue and eigenvector statistics are decoupled. The motivating question has been whether a freely stable random matrix has…
Financial markets are a complex dynamical system. The complexity comes from the interaction between a market and its participants, in other words, the integrated outcome of activities of the entire participants determines the markets trend,…
In this paper we consider a multivariate model-based approach to measure the dynamic evolution of tail risk interdependence among US banks, financial services and insurance sectors. To deeply investigate the risk contribution of insurers we…
This article concerns the tail probabilities of a light-tailed Markov-modulated L\'evy process stopped at a state-dependent Poisson rate. The tails are shown to decay exponentially at rates given by the unique positive and negative roots of…
This paper presents a novel approach to stochastic volatility (SV) modeling by utilizing nonparametric techniques that enhance our ability to capture the volatility of financial time series data, with a particular emphasis on the…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…
Financial stock return correlations have been analyzed through the lens of random matrix theory to differentiate the underlying signal from spurious correlations. The continuous spectrum of the eigenvalue distribution derived from the stock…
Price fluctuations of commodities like cotton and wheat are thought to display probability distributions of returns that follow a L\'evy stable distribution. Recent analysis of stocks and foreign exchange markets show that the probability…
Financial networks based on Pearson correlations have been intensively studied. However, previous studies may have led to misleading and catastrophic results because of several critical shortcomings of the Pearson correlation. The local…
This paper develops a large-scale inference approach for the regularization of stock return covariance matrices. The framework allows for the presence of heavy tails and multivariate GARCH-type effects of unknown form among the stock…
Using a recently introduced method to quantify the time varying lead-lag dependencies between pairs of economic time series (the thermal optimal path method), we test two fundamental tenets of the theory of fixed income: (i) the stock…
In financial markets, low prices are generally associated with high volatilities and vice-versa, this well known stylized fact usually being referred to as leverage effect. We propose a local volatility model, given by a stochastic…
The correlation matrix formalism is used to study temporal aspects of the stock market evolution. This formalism allows to decompose the financial dynamics into noise as well as into some coherent repeatable intraday structures. The present…