Related papers: Modeling a foreign exchange rate using moving aver…
In this paper, we design two chapters to discuss trade dynamics with heterogeneous fluctuations, contributing new insights to macroeconomic issues related to international trade. In the first chapter, we model general exchange rate…
We investigate the mechanisms behind the power-law distribution of stock returns using artificial market simulations. While traditional financial theory assumes Gaussian price fluctuations, empirical studies consistently show that the tails…
Financial market dynamics is rigorously studied via the exact generalized Langevin equation. Assuming market Brownian self-similarity, the market return rate memory and autocorrelation functions are derived, which exhibit an…
This paper proposes a numerical method for pricing foreign exchange (FX) options in a model which deals with stochastic interest rates and stochastic volatility of the FX rate. The model considers four stochastic drivers, each represented…
Financial markets change their behaviours abruptly. The mean, variance and correlation patterns of stocks can vary dramatically, triggered by fundamental changes in macroeconomic variables, policies or regulations. A trader needs to adapt…
We study the dynamics of exchange value in a system composed of many interacting agents. The simple model we propose exhibits cooperative emergence and collapse of global value for individual goods. We demonstrate that the demand that…
We propose a new model for the joint evolution of the European inflation rate, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for…
Recently, in order to explore the mechanism behind wealth or income distribution, several models have been proposed by applying principles of statistical mechanics. These models share some characteristics, such as consisting of a group of…
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…
Autoregressive models are ubiquitous tools for the analysis of time series in many domains such as computational neuroscience and biomedical engineering. In these domains, data is, for example, collected from measurements of brain activity.…
We seek to utilize the nonextensive statistics to the microscopic modeling of the interacting many-investor dynamics that drive the price changes in a market. The statistics of price changes are known to be fit well by the Students-T and…
Financial models do not merely analyse markets, but actively shape them. This effect, known as performativity, describes how financial theories and the subsequent actions based on them influence market processes, by creating self-fulfilling…
We introduce a new mixture autoregressive model which combines Gaussian and Student's $t$ mixture components. The model has very attractive properties analogous to the Gaussian and Student's $t$ mixture autoregressive models, but it is more…
We propose and investigate two model classes for forward power price dynamics, based on continuous branching processes with immigration, and on Hawkes processes with exponential kernel, respectively. The models proposed exhibit jumps…
This article examines how emerging economies use countercyclical monetary policies to manage economic crises and fluctuations in dominant currencies, such as the US dollar and the euro. Global economic cycles are marked by phases of…
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX…
Twenty five years ago, several authors proposed to describe the forward interest rate curve (FRC) as an elastic string along which idiosyncratic shocks propagate, accounting for the peculiar structure of the return correlation across…
We study a novel pricing operator for complete, local martingale models. The new pricing operator guarantees put-call parity to hold for model prices and the value of a forward contract to match the buy-and-hold strategy, even if the…
We analyze the price return distributions of currency exchange rates, cryptocurrencies, and contracts for differences (CFDs) representing stock indices, stock shares, and commodities. Based on recent data from the years 2017--2020, we model…
The Foreign Exchange (Forex) is a large decentralized market, on which trading analysis and algorithmic trading are popular. Research efforts have been focusing on proof of efficiency of certain technical indicators. We demonstrate,…