Related papers: A microscopic model of triangular arbitrage
We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen-dollar rate, the dollar-euro rate and the yen-euro rate. Next, we propose a model of…
Foreign exchange rates movements exhibit significant cross-correlations even on very short time-scales. The effect of these statistical relationships become evident during extreme market events, such as flash crashes.In this scenario, an…
We investigate triangular arbitrage within the spot foreign exchange market using high-frequency executable prices. We show that triangular arbitrage opportunities do exist, but that most have short durations and small magnitudes. We find…
We introduce a deterministic dealer model which implements most of the empirical laws, such as fat tails in the price change distributions, long term memory of volatility and non-Poissonian intervals. We also clarify the causality between…
This paper reviews some of the phenomenological models which have been introduced to incorporate the scaling properties of financial data. It also illustrates a microscopic model, based on heterogeneous interacting agents, which provides a…
In the present work we introduce a novel multi-agent model with the aim to reproduce the dynamics of a double auction market at microscopic time scale through a faithful simulation of the matching mechanics in the limit order book. The…
This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we find that arbitrage operations when four currencies are present may appear…
We proposed a market simulation model (micro model) which displays multifractality and reproduces many important stylized facts of speculative markets. From this model we analytically extracted the MMAR model (Multifractal Model of Asset…
We present an agent behavior based microscopic model for diffusion price processes. As such we provide a model not only containing a convenient framework for describing socio-economic behavior, but also a sophisticated link to price…
We propose a model with heterogeneous interacting traders which can explain some of the stylized facts of stock market returns. In the model synchronization effects, which generate large fluctuations in returns, can arise either from an…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
This paper presents macroeconomic model that is based on parallels between macroeconomic multi-agent systems and multi-particle systems. We use risk ratings of economic agents as their coordinates on economic space. Aggregates of economic…
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising…
We attempt to explain stock market dynamics in terms of the interaction among three variables: market price, investor opinion and information flow. We propose a framework for such interaction and apply it to build a model of stock market…
We present a novel microscopic stock market model consisting of a large number of random agents modeling traders in a market. Each agent is characterized by a set of parameters that serve to make iterated predictions of two successive…
We provide a numerical study of the macroscopic model of [3] derived from an agent-based model for a system of particles interacting through a dynamical network of links. Assuming that the network remodelling process is very fast, the…
The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…
We derive a system of stochastic differential equations simulating the dynamics of the three agent groups with herding interaction. Proposed approach can be valuable in the modeling of the complex socio-economic systems with similar…
Building on the macroscopic market making framework as a control problem, this paper investigates its extension to stochastic games. In the context of price competition, each agent is benchmarked against the best quote offered by the…
We consider a financial market model which consists of a financial asset and a large number of interacting agents classified into many types. Different types of agents are heterogeneous in their price expectations. Each agent can change its…