Related papers: What really causes large price changes?
Stock prices are observed to be random walks in time despite a strong, long term memory in the signs of trades (buys or sells). Lillo and Farmer have recently suggested that these correlations are compensated by opposite long ranged…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
In recent years, real estate industry has captured government and public attention around the world. The factors influencing the prices of real estate are diversified and complex. However, due to the limitations and one-sidedness of their…
The Price equation partitions the change in the expected value of a population measure. The first component describes the partial change caused by altered frequencies. The second component describes the partial change caused by altered…
Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…
Our goal in this paper is to study the market impact in a market in which the order flow is autocorrelated. We build a model which explains qualitatively and quantitatively the empirical facts observed so far concerning market impact. We…
We report on the occurrence of an anomaly in the price impacts of small transaction volumes following a change in the fee structure of an electronic market. We first review evidence for the existence of a master curve for price impact on…
We present a phenomenological study of stock price fluctuations of individual companies. We systematically analyze two different databases covering securities from the three major US stock markets: (a) the New York Stock Exchange, (b) the…
This paper studies a limit order book (LOB) model, in which the order dynamics depend on both, the current best available prices and the current volume density functions. For the joint dynamics of the best bid price, the best ask price, and…
We propose a model for the dynamics of a limit order book in a liquid market where buy and sell orders are submitted at high frequency. We derive a functional central limit theorem for the joint dynamics of the bid and ask queues and show…
Modelling accurately financial price variations is an essential step underlying portfolio allocation optimization, derivative pricing and hedging, fund management and trading. The observed complex price fluctuations guide and constraint our…
The large scale fluctuations of the ordered state in active matter systems are usually characterised by studying the "giant number fluctuations" of particles in any finite volume, as compared to the expectations from the central limit…
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…
High Frequency Trading (HFT) represents an ever growing proportion of all financial transactions as most markets have now switched to electronic order book systems. The main goal of the paper is to propose continuous time equations which…
We propose a new model for the level I of a Limit Order Book (LOB), which incorporates the information about the standing orders at the opposite side of the book after each price change and the arrivals of new orders within the spread. Our…
We propose a model for price formation in financial markets based on clearing of a standard call auction with random orders, and verify its validity for prediction of the daily closing price distribution statistically. The model considers…
This work's purpose is to understand the dynamics of limit order books in order-driven markets. We try to illustrate a dynamical trading mechanism attached to the microstructure of limit order markets. We capture the iterative nature of…
In the Cont-Bouchaud model [cond-mat/9712318] of stock markets, percolation clusters act as buying or selling investors and their statistics controls that of the price variations. Rather than fixing the concentration controlling each…
Understanding the mutual relationships between information flows and social activity in society today is one of the cornerstones of the social sciences. In financial economics, the key issue in this regard is understanding and quantifying…
Modeling the impact of the order flow on asset prices is of primary importance to understand the behavior of financial markets. Part I of this paper reported the remarkable improvements in the description of the price dynamics which can be…