Related papers: Financial markets as adaptative ecosystems

Financial markets provide an ideal frame for the study of crossing or first-passage time events of non-Gaussian correlated dynamics mainly because large data sets are available. Tick-by-tick data of six futures markets are herein considered…

As a typical representation of complex networks studied relatively thoroughly, financial market presents some special details, such as its nonconservation and opinions spreading. In this model, agents congregate to form some clusters, which…

We present a simple order book mechanism that regulates an artificial financial market with self-organized criticality dynamics and fat tails of returns distribution. The model shows the role played by individual imitation in determining…

We propose a random walk model of asset returns where the parameters depend on market stress. Stress is measured by, e.g., the value of an implied volatility index. We show that model parameters including standard deviations and…

An exact solution is presented to a model that mimics the crowding effect in financial markets which arises when groups of agents share information. We show that the size distribution of groups of agents has a power law tail with an…

The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…

Prediction markets rely on liquidity to convert trades into informative prices, yet existing mechanisms fix liquidity ex ante. This restriction enforces a static trade-off between price responsiveness and worst-case loss despite inherently…

We empirically analyze the reversion of financial market trends with time horizons ranging from minutes to decades. The analysis covers equities, interest rates, currencies and commodities and combines 14 years of futures tick data, 30…

We show that recent stock market fluctuations are characterized by the cumulative distributions whose tails on short, minute time scales exhibit power scaling with the scaling index alpha > 3 and this index tends to increase quickly with…

We provide further evidence that markets trend on the medium term (months) and mean-revert on the long term (several years). Our results bolster Black's intuition that prices tend to be off roughly by a factor of 2, and take years to…

We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…

Estimating and controlling large risks has become one of the main concern of financial institutions. This requires the development of adequate statistical models and theoretical tools (which go beyond the traditionnal theories based on…

We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…

We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…

Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…

We propose a transformation capable of altering the tail properties of a distribution, motivated by extreme value theory, which can be used as a layer in a normalizing flow to approximate multivariate heavy tailed distributions. We apply…

Atoms and molecules are important conceptual entities we invented to understand the physical world around us. The key to their usefulness lies in the organization of nuclear and electronic degrees of freedom into a single dynamical variable…

In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…

As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…

We suggest an original physical approach to describe the mechanism of market pricing. The core of our approach is to consider pricing at different time scales separately, using independent equations of motion. Such an approach leads to a…