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The dynamics of a stock market with heterogeneous agents is discussed in the framework of a recently proposed spin model for the emergence of bubbles and crashes. We relate the log returns of stock prices to magnetization in the model and…
The percolation model of stock market speculation allows an asymmetry (in the return distribution) leading to fast downward crashes and slow upward recovery. We see more small upturns and more intermediate downturns.
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 introduce a mathematical criterion defining the bubbles or the crashes in financial market price fluctuations by considering exponential fitting of the given data. By applying this criterion we can automatically extract the periods in…
In order to figure out and to forecast the emergence phenomena of social systems, we propose several probabilistic models for the analysis of financial markets, especially around a crisis. We first attempt to visualize the collective…
Using microscopic price models based on Hawkes processes, it has been shown that under some no-arbitrage condition, the high degree of endogeneity of markets together with the phenomenon of metaorders splitting generate rough Heston-type…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We show that infinite divisibility of a trading commodity leads to a self-sustained price bubble when traders use adaptive investment strategies. The adaptive strategy can be viewed as a psychological response of a trader to the situation…
We study the temporal fluctuations in time-dependent stock prices (both individual and composite) as a stochastic phenomenon using general techniques and methods of nonequilibrium statistical mechanics. In particular, we analyze stock price…
In this study, we perform a novel analysis of the 2015 financial bubble in the Chinese stock market by calibrating the Log Periodic Power Law Singularity (LPPLS) model to two important Chinese stock indices, SSEC and SZSC, from early 2014…
It is believed by the majority today that the efficient market hypothesis is imperfect because of market irrationality. Using the physical concepts and mathematical structures of quantum mechanics, we construct an econophysics framework for…
According to behavioral finance, stock market returns are influenced by emotional, social and psychological factors. Several recent works support this theory by providing evidence of correlation between stock market prices and collective…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We exploit a continuous time random walk description of stock prices to obtain a fast and accurate evaluation of their volatility from intraday data. We show that financial markets are usefully described as open physical systems. Indeed we…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
The analysis of high-frequency financial data is often impeded by the presence of noise. This article is motivated by intraday return data in which market microstructure noise appears to be rough, that is, best captured by a continuous-time…
A simple spin model is studied, motivated by the dynamics of traders in a market where expectation bubbles and crashes occur. The dynamics is governed by interactions which are frustrated across different scales: While ferromagnetic…
In this paper we investigate general linear stochastic volatility models with correlated Brownian noises. In such models the asset price satisfies a linear SDE with coefficient of linearity being the volatility process. This class contains…
The non-gaussianity of processes observed in financial markets and relatively good performance of gaussian models can be reconciled by replacing the Brownian motion with Levy processes whose Levy densities decay as exp(-lambda|x|) or…