Related papers: Markovian approximation in foreign exchange market…
The vast literature on exchange rate fluctuations estimates the exchange rate pass-through (ERPT). Most ERPT studies consider annually aggregated data for developed or large developing countries for estimating ERPT. These estimates vary…
The Efficient Market Hypothesis (EMH) is widely accepted to hold true under certain assumptions. One of its implications is that the prediction of stock prices at least in the short run cannot outperform the random walk model. Yet, recently…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general…
Specialized topics on financial data analysis from a numerical and physical point of view are discussed. They pertain to the analysis of crash prediction in stock market indices and to the persistence or not of coherent and random sequences…
This paper reports empirical evidence that a neural networks model is applicable to the statistically reliable prediction of foreign exchange rates. Time series data and technical indicators such as moving average, are fed to neural nets to…
We briefly review our recent studies on stochastic processes modelling internet on-line trading. We present a way to evaluate the average waiting time between the observation of the price in financial markets and the next price change,…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
We discuss stochastic modeling of volatility persistence and anti-correlations in electricity spot prices, and for this purpose we present two mean-reverting versions of the multifractal random walk (MRW). In the first model the…
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.…
This paper models stochastic process of price time series of CSI 300 index in Chinese financial market, analyzes volatility characteristics of intraday high-frequency price data. In the new generalized Barndorff-Nielsen and Shephard model,…
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…
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed…
Deriving Bayesian inference for exponential random graph models (ERGMs) is a challenging "doubly intractable" problem as the normalizing constants of the likelihood and posterior density are both intractable. Markov chain Monte Carlo (MCMC)…
We study the volatility of the MIB30-stock-index high-frequency data from November 28, 1994 through September 15, 1995. Our aim is to empirically characterize the volatility random walk in the framework of continuous-time finance. To this…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
The multifractal behavior for tick data of prices is investigated in Korean financial market. Using the rescaled range analysis(R/S analysis), we show the multifractal nature of returns for the won-dollar exchange rate and the KOSPI. We…
Several models of stock trading [P. Bak et al, Physica A {\bf 246}, 430 (1997)] are analyzed in analogy with one-dimensional, two-species reaction-diffusion-branching processes. Using heuristic and scaling arguments, we show that the…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…