Related papers: Triangular arbitrage as an interaction among forei…
Two formulations are proposed to filter out correlations in the residuals of the multivariate GARCH model. The first approach is to estimate the correlation matrix as a parameter and transform any joint distribution to have an arbitrary…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
We introduce and analyze a variation of the Bertrand game in which the revenue is shared between two players. This game models situations in which one economic agent can provide goods/services to consumers either directly or through an…
In the context of a general semimartingale model of a complete market, we aim at answering the following question: How much is an investor willing to pay for learning some inside information that allows to achieve arbitrage? If such a value…
A quantitative check of weak efficiency in US dollar/German mark exchange rates is developed using high frequency data. We show the existence of long term return anomalies. We introduce a technique to measure the available information and…
Synchronization is a phenomenon in which a pair of fluctuations adjust their rhythms when interacting with each other. We measure the degree of synchronization between the U.S. dollar (USD) and euro exchange rates and between the USD and…
We investigate high frequency price dynamics in foreign exchange market using data from Reuters information system (the dataset has been provided to us by Ols en & Associates). In our analysis we show that a na\"ive approach to the…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
We prove the existence of a Radner equilibrium in a model with proportional transaction costs on an infinite time horizon and analyze the effect of transaction costs on the endogenously determined interest rate. Two agents receive…
It is shown that prize changes of the US dollar - German Mark exchange rates upon different delay times can be regarded as a stochastic Marcovian process. Furthermore we show that from the empirical data the Kramers-Moyal coefficients can…
We quantify how co-jumps impact correlations in currency markets. To disentangle the continuous part of quadratic covariation from co-jumps, and study the influence of co-jumps on correlations, we propose a new wavelet-based estimator. The…
Many studies have shown that there are good reasons to claim very low predictability of currency nevertheless, the deviations from true randomness exist which have potential predictive and prognostic power [J.James, Quantitative finance 3…
We use techniques from network science to study correlations in the foreign exchange (FX) market over the period 1991--2008. We consider an FX market network in which each node represents an exchange rate and each weighted edge represents a…
This paper proposes a numerical method for pricing foreign exchange (FX) options in a model which deals with stochastic interest rates and stochastic volatility of the FX rate. The model considers four stochastic drivers, each represented…
In this work, we investigate a biased dollar exchange model with collective debt limit, in which agents picked at random (with a rate depending on the amount of dollars they have) give at random time a dollar to another agent being picked…
We have discovered 12 independent new empirical scaling laws in foreign exchange data-series that hold for close to three orders of magnitude and across 13 currency exchange rates. Our statistical analysis crucially depends on an…
We present a simplistic model of the competition between different currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a different…
A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…
An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an…