Related papers: Speculative trading: the price multiplier effect
We provide simple models for the utility function (or psychology) of an actor trading a multitude of goods for money. In this framework, money has no intrinsic consumption value, but is required as a medium of exchange. A collection of such…
We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…
Barlow (1985) hypothesized that the co-occurrence of two events $A$ and $B$ is "suspicious" if $P(A,B) \gg P(A) P(B)$. We first review classical measures of association for $2 \times 2$ contingency tables, including Yule's $Y$ (Yule, 1912),…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
An investor trades a safe and several risky assets with linear price impact to maximize expected utility from terminal wealth. In the limit for small impact costs, we explicitly determine the optimal policy and welfare, in a general…
In financial markets, greater volatility is usually considered synonym of greater risk and instability. However, large market downturns and upturns are often preceded by long periods where price returns exhibit only small fluctuations. To…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification…
A taxonomy of large financial crashes proposed in the literature locates the burst of speculative bubbles due to endogenous causes in the framework of extreme stock market crashes, defined as falls of market prices that are outlier with…
In this paper we study the price dynamics in a simple model of financial markets with heterogeneous agents. We concentrate on how increases in the total number of active traders influences fluctuations of asset prices. We find that a…
The financial market is nonpredictable, as according to the Bachelier, the mathematical expectation of the speculator is zero. Nevertheless, we observe in the price fluctuations the two distinct scales, short and long time. Behaviour of a…
We consider a tick-by-tick model of price formation, in which buy and sell orders are modeled as self-exciting point processes (Hawkes process), similar to the one in [Bacry, Delattre, Hoffmann, Muzy, Modelling microstructure noise with…
Prediction markets mobilize financial incentives to forecast binary event outcomes through the aggregation of dispersed beliefs and heterogeneous information. Their growing popularity and demonstrated predictive accuracy in political…
Collective phenomena with universal properties have been observed in many complex systems with a large number of components. Here we present a microscopic model of the emergence of scaling behavior in such systems, where the interaction…
We introduce a new formulation of asset trading games in continuous time in the framework of the game-theoretic probability established by Shafer and Vovk (Probability and Finance: It's Only a Game! (2001) Wiley). In our formulation, the…
When prices reflect all available information, they oscillate around an equilibrium level. This oscillation is the result of the temporary market impact caused by waves of buyers and sellers. This price behavior can be approximated through…
Market manipulation is a strategy used by traders to alter the price of financial securities. One type of manipulation is based on the process of buying or selling assets by using several trading strategies, among them spoofing is a popular…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
In this study, we investigate the statistical properties of the returns and the trading volume. We show a typical example of power-law distributions of the return and of the trading volume. Next, we propose an interacting agent model of…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…