Related papers: Indeterminacy in foreign exchange market
In this paper, we focus on option pricing models based on space-time fractional diffusion. We briefly revise recent results which show that the option price can be represented in the terms of rapidly converging double-series and apply these…
This paper examines how shocks to currency volatilities predict exchange rates. Using option-implied volatilities, we construct a dynamic, directed network of volatility connections. Currencies that transmit more volatility shocks, which…
The local Hurst exponent, a measure employed to detect the presence of dependence in a time series, may also be used to investigate the source of intraday variation observed in the returns in foreign exchange markets. Given that changes in…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
Cryptocurrencies fluctuate in markets with high price volatility, posing significant challenges for investors. To aid in informed decision-making, systems predicting cryptocurrency market movements have been developed, typically focusing on…
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
Statistical dynamics of financial systems is investigated, based on a model of a randomly coupled equation system driven by a stochastic Langevin force. Anticorrelations of price returns, and subdiffusion of prices is found from the model,…
This paper presents static and dynamic versions of univariate, multivariate, and multilevel functional time-series methods to forecast implied volatility surfaces in foreign exchange markets. We find that dynamic functional principal…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
In a system containing a large number of interacting stochastic processes, there will typically be many non-zero correlation coefficients. This makes it difficult to either visualize the system's inter-dependencies, or identify its dominant…
The stability of money value is an important requisite for a functioning economy, yet it critically depends on the actions of participants in the market themselves. Here we model the value of money as a dynamical variable that results from…
The economic and financial variables of economic agents determine macroeconomic variables. Current models consider agents' variables that are determined by the sums of values and volumes of agents' trades during some time interval {\Delta}.…
Diffusion processes driven by Fractional Brownian motion (FBM) have often been considered in modeling stock price dynamics in order to capture the long range dependence of stock price observed in reality. Option prices for such models had…
Market confidence is essential for successful investing. By incorporating multi-market into the evolutionary minority game, we investigate the effects of investor beliefs on the evolution of collective behaviors and asset prices. When there…
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…
We study the local volatility function in the Foreign Exchange market where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and…
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
This thesis applies entropy as a model independent measure to address three research questions concerning financial time series. In the first study we apply transfer entropy to drawdowns and drawups in foreign exchange rates, to study their…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
We investigate quotation and transaction activities in the foreign exchange market for every week during the period of June 2007 to December 2010. A scaling relationship between the mean values of number of quotations (or number of…