Related papers: Hybrid dynamics for currency modeling
We present a HJM approach to the projection of multiple yield curves developed to capture the volatility content of historical term structures for risk management purposes. Since we observe the empirical data at daily frequency and only for…
The paper demonstrates that a pure-diffusion 3/2 model is able to capture the observed upward-sloping implied volatility skew in VIX options. This observation contradicts a common perception in the literature that jumps are required for the…
We study the dynamics of the linear and non-linear serial dependencies in financial time series in a rolling window framework. In particular, we focus on the detection of episodes of statistically significant two- and three-point…
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,…
Species subject to predation and environmental threats commonly exhibit variable periods of population boom and bust over long timescales. Understanding and predicting such behavior, especially given the inherent heterogeneity and…
Signals coming from multivariate higher order conditional moments as well as the information contained in exogenous covariates, can be effectively exploited by rational investors to allocate their wealth among different risky investment…
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…
This paper aims at solving FX market volatility modeling problem and finding the most becoming approach to this task. Validity of two competing approaches, classical econometric generalized conditional heteroscedasticity and mathematical…
Using probabilistic approach, the transient dynamics of sparsely connected Hopfield neural networks is studied for arbitrary degree distributions. A recursive scheme is developed to determine the time evolution of overlap parameters. As…
The intricate behavior patterns of financial markets are influenced by fundamental, technical, and psychological factors. During times of high volatility and regime shifts causes many traditional strategies like trend-following or…
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
Different approaches have been used in the development of system models. In addition, modeling and simulation approaches are essential for design, analysis, control, and diagnosis of complex systems. This work presents a Simulink model for…
Many existing approaches for generating predictions in settings with distribution shift model distribution shifts as adversarial or low-rank in suitable representations. In various real-world settings, however, we might expect shifts to…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
This paper develops a dynamic factor model in which common level and volatility factors evolve jointly, allowing conditional means and variances to interact endogenously within a large-information setting. The joint evolution of these…
Forecasting central bank policy decisions remains a persistent challenge for investors, financial institutions, and policymakers due to the wide-reaching impact of monetary actions. In particular, anticipating shifts in the U.S. federal…
For a wide variety of problems, creating detailed continuous models of (continuous) physical systems is, at the very least, impractical. Hybrid models can abstract away short transient behaviour (thus introducing discontinuities) in order…
Time series momentum strategies are widely applied in the quantitative financial industry and its academic research has grown rapidly since the work of Moskowitz, Ooi and Pedersen (2012). However, trading signals are usually obtained via…