Related papers: Speculative trading: the price multiplier effect

This paper assumes that the randomness of market trade values and volumes determines the properties of stochastic market prices. We derive the direct dependence of the first two price statistical moments and price volatility on statistical…

We propose coalescent mechanism of economic grow because of redistribution of external resources. It leads to Zipf distribution of firms over their sizes, turning to stretched exponent because of size-dependent effects, and predicts…

We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…

Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…

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…

We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…

We present and study a Minority Game based model of a financial market where adaptive agents -- the speculators -- interact with deterministic agents -- called producers. Speculators trade only if they detect predictable patterns which…

We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…

A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate…

We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…

We carry out a detailed large-scale data analysis of price response functions in the spot foreign exchange market for different years and different time scales. Such response functions provide quantitative information on the deviation from…

Econophysics and econometrics agree that there is a correlation between volume and volatility in a time series. Using empirical data and their distributions, we further investigate this correlation and discover new ways that volatility and…

In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…

This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…

We introduce the stochastic multiplicative point process modelling trading activity of financial markets. Such a model system exhibits power-law spectral density S(f) ~ 1/f**beta, scaled as power of frequency for various values of beta…

Alpha signals for statistical arbitrage strategies are often driven by latent factors. This paper analyses how to optimally trade with latent factors that cause prices to jump and diffuse. Moreover, we account for the effect of the trader's…

We show that recent stock market fluctuations are characterized by the cumulative distributions whose tails on short, minute time scales exhibit power scaling with the scaling index alpha > 3 and this index tends to increase quickly with…

A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…

Betting markets are gaining in popularity. Mean beliefs generally differ from prices in prediction markets. Logarithmic utility is employed to study the risk and return adjustments to prices. Some consequences are described. A modified…

A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…