Related papers: Speculative trading: the price multiplier effect
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…
A phenomenon of the financial log-periodicity is discussed and the characteristics that amplify its predictive potential are elaborated. The principal one is self-similarity that obeys across all the time scales. Furthermore the same…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect,…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
We study in this paper the time evolution of stock markets using a statistical physics approach. Each agent is represented by a spin having a number of discrete states $q$ or continuous states, describing the tendency of the agent for…
We introduce a new stochastic model for the variations of asset prices at the tick-by-tick level in dimension 1 (for a single asset) and 2 (for a pair of assets). The construction is based on marked point processes and relies on linear self…
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…
We study trade-based manipulation of stock prices from the perspective of complex trading networks constructed by using detailed information of trades. A stock trading network consists of nodes and directed links, where every trader is a…
Understanding the structure of financial markets deals with suitably determining the functional relation between financial variables. In this respect, important variables are the trading activity, defined here as the number of trades $N$,…
Volatility measures the amplitude of price fluctuations. Despite it is one of the most important quantities in finance, volatility is not directly observable. Here we apply a maximum likelihood method which assumes that price and volatility…
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 contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
We give a stochastic microscopic modelling of stock markets driven by continuous double auction. If we take into account the mimetic behavior of traders, when they place limit order, our virtual markets shows the power-law tail of the…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
We present a set of models of the main stylized facts of market price fluctuations. These models comprise dynamical evolution with threshold dynamics and Langevin price equation with multiplicative noise, percolation models to describe the…
This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…
We consider a market where many agents trade many different types of products with each other. We model development of collective modes in this market, and quantify these by fluctuations that scale with time with a Hurst exponent of about…