Related papers: Price systems for markets with transaction costs a…
Statistical mechanics provides a useful analog for understanding the behavior of complex adaptive systems, including power markets and the power systems they intend to govern. Transaction-based control is founded on the conjecture that the…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
This survey is an introduction to asymptotic methods for portfolio-choice problems with small transaction costs. We outline how to derive the corresponding dynamic programming equations and simplify them in the small-cost limit. This allows…
Pricing decisions of companies require an understanding of the causal effect of a price change on the demand. When real-life pricing experiments are infeasible, data-driven decision-making must be based on alternative data sources such as…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
We study an optimal execution problem with uncertain market impact to derive a more realistic market model. We construct a discrete-time model as a value function for optimal execution. Market impact is formulated as the product of a…
This study explores the prediction of high-frequency price changes using deep learning models. Although state-of-the-art methods perform well, their complexity impedes the understanding of successful predictions. We found that an…
We consider the problem of dynamic buying and selling of shares from a collection of $N$ stocks with random price fluctuations. To limit investment risk, we place an upper bound on the total number of shares kept at any time. Assuming that…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
The importance of considering the volumes to analyze stock prices movements can be considered as a well-accepted practice in the financial area. However, when we look at the scientific production in this field, we still cannot find a…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
We consider a market where a finite number of players trade an asset whose supply is a stochastic process. The price formation problem consists of finding a price process that ensures that when agents act optimally to minimize their trading…
We propose that predictability is a prerequisite for profitability on financial markets. We look at ways to measure predictability of price changes using information theoretic approach and employ them on all historical data available for…
Kusuoka [ Limit Theorem on Option Replication Cost with Transaction Costs, Ann. Appl. Probab. 5, 198--221, (1995).] showed how to obtain non-trivial scaling limits of superreplication prices in discrete-time models of a single risky asset…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price,...). Thus, in practice, market participants face the problem…
Involving effects of media, opinion leader and other agents on the opinion of individuals of market society, a trader based model is developed and utilized to simulate price via supply and demand. Pronounced effects are considered with…
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…