Related papers: Markovian approximation in foreign exchange market…
As a model of market price, we introduce a new type of random walk in a moving potential which is approximated by a quadratic function with its center given by the moving average of its own trace. The properties of resulting random walks…
This work considers a stochastic model in which the uncertainty is driven by a multidimensional Brownian motion. The market price of risk process makes the transition between real world probability measure and risk neutral probability…
A time-varying cointegration model for foreign exchange rates is presented. Unlike previous studies, we allow the loading matrix in the vector error correction (VEC) model to be varying over time. Because the loading matrix in the VEC model…
The main purpose of this study is the determination of the optimal length of the historical data for the estimation of statistical parameters in Markowitz Portfolio Optimization. We present a trading simulation using Markowitz method, for a…
Used to investigate the presence of distinctive recurrent behaviours in natural processes, the recurrence plots can be applied to the analysis of economic data, and, in particular, to the characterization of exchange rates of currencies…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
This paper considers the theoretical, computational, and econometric properties of continuous time dynamic discrete choice games with stochastically sequential moves, introduced by Arcidiacono, Bayer, Blevins, and Ellickson (2016). We…
We model financial transactions as random walks on activity-driven temporal networks. By enforcing fund conservation, our framework analytically derives heavy-tailed distributions for the stationary balances and transaction sizes.…
We study random walk on complex networks with transition probabilities which depend on the current and previously visited nodes. By using an absorbing Markov chain we derive an exact expression for the mean first passage time between pairs…
Based on the new type of random walk process called the Potentials of Unbalanced Complex Kinetics (PUCK) model, we theoretically show that the price diffusion in large scales is amplified 2/(2 + b) times, where b is the coefficient of…
World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign…
Empirical analysis of the foreign exchange market is conducted based on methods to quantify similarities among multi-dimensional time series with spectral distances introduced in [A.-H. Sato, Physica A, 382 (2007) 258--270]. As a result it…
Some expansion methods have been proposed for approximately pricing options which has no exact closed formula. Benhamou et al. (2010) presents the smart expansion method that directly expands the expectation value of payoff function with…
Lead-lag relationships among assets represent a useful tool for analyzing high frequency financial data. However, research on these relationships predominantly focuses on correlation analyses for the dynamics of stock prices, spots and…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
We introduce a deterministic dealer model which implements most of the empirical laws, such as fat tails in the price change distributions, long term memory of volatility and non-Poissonian intervals. We also clarify the causality between…
We adapt continuous time random walk (CTRW) formalism to describe asset price evolution and discuss some of the problems that can be treated using this approach. We basically focus on two aspects: (i) the derivation of the price…
We propose a model of random walks on weighted graphs where the weights are interval valued, and connect it to reversible imprecise Markov chains. While the theory of imprecise Markov chains is now well established, this is a first attempt…
In this paper, we focus on the estimation of historical volatility of asset prices from high-frequency data. Stochastic volatility models pose a major statistical challenge: since in reality historical volatility is not observable, its…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…