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In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
In this paper we study random matrix models where the matrices in question contain infinitely many spikes. Recent work has characterized the possible outliers in the spectrum of large deformed unitarily invariant models when the number of…
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 bound features of counterfactual choices in the nonparametric random utility model of demand, i.e. if observable choices are repeated cross-sections and one allows for unrestricted, unobserved heterogeneity. In this setting, tight bounds…
We develop a novel observation-driven model for high-frequency prices. We account for irregularly spaced observations, simultaneous transactions, discreteness of prices, and market microstructure noise. The relation between trade durations…
The price clustering phenomenon manifesting itself as an increased occurrence of specific prices is widely observed and well-documented for various financial instruments and markets. In the literature, however, it is rarely incorporated…
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…
Real complex systems are not rigidly structured; no clear rules or blueprints exist for their construction. Yet, amidst their apparent randomness, complex structural properties universally emerge. We propose that an important class of…
An empirical study of joint bivariate probability distribution of two consecutive price increments for a set of stocks at time scales ranging from one minute to thirty minutes reveals asymmetric structures with respect to the axes y=0, y=x,…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
Complex network theory has recently been proposed as a promising tool for characterising interactions between aircraft, and their downstream effects. We here explore the problem of networks' topological predictability, i.e. the dependence…
Scale invariance, collective behaviours and structural reorganization are crucial for portfolio management (portfolio composition, hedging, alternative definition of risk, etc.). This lack of any characteristic scale and such elaborated…
We introduce a non linear pricing model of individual stock returns that defines a stickiness parameter of the returns. The pricing model resembles the capital asset pricing model used in finance but has a non linear component inspired from…
We present a model that investigates the spontaneous emergence of randomness in equity market microstructure. The phase space analysis of our model exposes an endogenous source of fluctuation in price and volume. We formulate a control…
A simple Hawkes model have been developed for the price tick structure dynamics incorporating market microstructure noise and trade clustering. In this paper, the model is extended with random mark to deal with more realistic price tick…
We examine dynamic coupling and feedback effects between High Frequency Traders (HFTs) and how they can destabilize markets. We develop a general framework for modelling dynamic interaction based on recurrence relations, and use this to…
Price changes are induced by aggressive market orders in stock market. We introduce a bivariate marked Hawkes process to model aggressive market order arrivals at the microstructural level. The order arrival intensity is marked by an…
We explore heterogeneous prices as a source of heterogeneous or stochastic demand. Heterogeneous prices could arise either because there is actual price variation among consumers or because consumers (mis)perceive prices differently. Our…
We study super-replication of contingent claims in an illiquid market with model uncertainty. Illiquidity is captured by nonlinear transaction costs in discrete time and model uncertainty arises as our only assumption on stock price returns…