Related papers: Multifractal model of asset returns with leverage …

We present a general class of spatio-temporal stochastic processes describing the causal evolution of a positive-valued field in space and time. The field construction is based on independently scattered random measures of Levy type whose…

In this paper we seek to demonstrate the predictability of stock market returns and explain the nature of this return predictability. To this end, we introduce investors with different investment horizons into the news-driven, analytic,…

In quantitative investing, return prediction supports various tasks, including stock selection, portfolio optimization, and risk management. Quantitative factors, such as valuation, quality, and growth, capture various characteristics of…

We address the problem of long-range memory in the financial markets. There are two conceptually different ways to reproduce power-law decay of auto-correlation function: using fractional Brownian motion as well as non-linear stochastic…

In structural credit risk models, default events and the ensuing losses are both derived from the asset values at maturity. Hence it is of utmost importance to choose a distribution for these asset values which is in accordance with…

We study inverse reinforcement learning (IRL) and imitation learning (IM), the problems of recovering a reward or policy function from expert's demonstrated trajectories. We propose a new way to improve the learning process by adding a…

The coupled nonlinear volatility and option pricing model presented recently by Ivancevic is investigated, which generates a leverage effect, i.e., stock volatility is (negatively) correlated to stock returns, and can be regarded as a…

We analyze daily prices of 29 commodities and 2449 stocks, each over a period of $\approx 15$ years. We find that the price fluctuations for commodities have a significantly broader multifractal spectrum than for stocks. We also propose…

Recent studies show that a negative shock in stock prices will generate more volatility than a positive shock of similar magnitude. The aim of this paper is to appraise the hypothesis under which the conditional mean and the conditional…

In an asset return series there is a conditional asymmetric dependence between current return and past volatility depending on the current return's sign. To take into account the conditional asymmetry, we introduce new models for asset…

In this paper it was developed a modification of the known multiagent model Minority Game, designed to simulate the behavior of traders in financial markets and the resulting price dynamics on the abstract resource. The model was…

We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…

We propose a simple stochastic volatility model which is analytically tractable, very easy to simulate and which captures some relevant stylized facts of financial assets, including scaling properties. In particular, the model displays a…

Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…

Accurate volatility modelling is paramount for optimal risk management practices. One stylized feature of financial volatility that impacts the modelling process is long memory explored in this paper for alternative risk measures, observed…

In this paper we explain the wild fluctuations of financial prices from the intrinsic amplifying feedback of speculative supply and demand. Formally, we show that an asset return follows a multiplicative random growth with exogenous input,…

We generalize the construction of the multifractal random walk (MRW) due to Bacry, Delour and Muzy to take into account the asymmetric character of the financial returns. We show how one can include in this class of models the observed…

In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…

We propose a comprehensive treatment of the leverage effect, i.e. the relationship between returns and volatility of a specific asset, focusing on energy commodities futures, namely Brent and WTI crude oils, natural gas and heating oil.…

Many economic variables feature changes in their conditional mean and volatility, and Time Varying Vector Autoregressive Models are often used to handle such complexity in the data. Unfortunately, when the number of series grows, they…