Related papers: Indeterminacy in foreign exchange market
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
A theory which describes the share price evolution at financial markets as a continuous-time random walk has been generalized in order to take into account the dependence of waiting times t on price returns x. A joint probability density…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
We study valuation of swing options on commodity markets when the commodity prices are driven by multiple factors. The factors are modeled as diffusion processes driven by a multidimensional L\'evy process. We set up a valuation model in…
We measure the influence of different time-scales on the dynamics of financial market data. This is obtained by decomposing financial time series into simple oscillations associated with distinct time-scales. We propose two new time-varying…
For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there…
We explore nature of price formation in financial markets and develop a theory of bid and ask price dynamics in which the two prices form due to quantum-chaotic interaction between buy and sell orders. In this model bid and ask prices are…
Anomalous diffusions arise as scaling limits of continuous-time random walks (CTRWs) whose innovation times are distributed according to a power law. The impact of a non-exponential waiting time does not vanish with time and leads to…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
The pricing of currency options is largely dependent on the dynamic relationship between a pair of currencies. Typically, the pricing of options with payoffs dependent on multi-assets becomes tricky for reasons such as the non-Gaussian…
This paper examines the intra-day seasonality of transacted limit and market orders in the DEM/USD foreign exchange market. Empirical analysis of completed transactions data based on the Dealing 2000-2 electronic inter-dealer broking system…
We develop a theory of securities price formation and dynamics based on quantum approach and without presuming any similarities with quantum mechanics. Disorder introduced by trading environment leads to probability distribution of returns…
We consider economic obstacles that limit the reliability and accuracy of value-at-risk (VaR). Investors who manage large market transactions should take into account the impact of the randomness of large trade volumes on predictions of…
This paper develops a dynamic monetary model to study the (in)stability of the fractional reserve banking system. The model shows that the fractional reserve banking system can endanger stability in that equilibrium is more prone to exhibit…
This paper provides the mathematical foundation for polynomial diffusions. They play an important role in a growing range of applications in finance, including financial market models for interest rates, credit risk, stochastic volatility,…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses a market maker based method of price…
In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author…
In this paper we aim to improve existing empirical exchange rate models by accounting for uncertainty with respect to the underlying structural representation. Within a flexible Bayesian non-linear time series framework, our modeling…