Related papers: Inner Market as a "Black Box"
It seems to be very unlikely that all relevant information in the stock market could be fully encoded in a geometrical shape. Still,the present paper will reveal the geometry behind the stock market transactions. The prices of market index…
It is well known that the distribution of returns from various financial instruments are leptokurtic, meaning that the distributions have "fatter tails" than a Normal distribution, and have skew toward zero. This paper presents a graceful…
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 possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random…
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…
Traders in a market typically have widely different, private information on the return of an asset. The equilibrium price of the asset may reflect this information more accurately if the number of traders is large enough compared to the…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
This paper models firm-to-firm trade in a production network as a set of double auctions. Firms have multilateral market power, namely, can affect prices in both input and output markets. The size and division of surplus are endogenous and…
This paper studies a monopolist selling multiple goods to a consumer with one-dimensional private types. I provide a sufficient condition under which the monopolist's problem is equivalent to finding the upper envelope of the marginal…
We propose a simple statistical-physics-inspired model for the effect of intrinsic fluctuations on supply and demand in markets. The model consists of agents that trade in two types of goods of which the total number is separately…
Prediction problems in finance go beyond estimating the unknown parameters of a model (e.g. of expected returns). This is because such a model would have to include parameters governing the market participants' propensity to change their…
A novel approach to analyzing time series generated by complex systems, such as markets, is presented. The basic idea of the approach is the {\it Law of Self-Similar Evolution}, according to which any complex system develops self-similarly.…
We study the role of active and passive investors in an investment market with uncertainties. Active investors concentrate on a single or a few stocks with a given probability of determining the quality of them. Passive investors spread…
We find empirically a characteristic sharp peak-flat trough pattern in a large set of commodity prices. We argue that the sharp peak structure reflects an endogenous inter-market organization, and that peaks may be seen as local…
Financial stock returns correlations have been studied in the prism of random matrix theory, to distinguish the signal from the "noise". Eigenvalues of the matrix that are above the rescaled Marchenko Pastur distribution can be interpreted…
Financial markets are a classical example of complex systems as they comprise many interacting stocks. As such, we can obtain a surprisingly good description of their structure by making the rough simplification of binary daily returns.…
One of the principal statistical features characterizing the activity in financial markets is the distribution of fluctuations in market indicators such as the index. While the developed stock markets, e.g., the New York Stock Exchange…
In recent years, the use of sophisticated statistical models that influence decisions in domains of high societal relevance is on the rise. Although these models can often bring substantial improvements in the accuracy and efficiency of…
This paper measures and compares the tail risks of limit and market orders using Extreme Value Theory. The analysis examines realised tail outcomes using the Dealing 2000-2 electronic broking system based on completed transactions rather…
A first-order model for a stock market assigns to each stock a return parameter and a variance parameter that depend only on the rank of the stock. A second-order model assigns these parameters based on both the rank and the name of the…