Related papers: Trend arbitrage, bid-ask spread and market dynamic…
Recent research on the response of stock prices to trading activity revealed long lasting effects, even across stocks of different companies. These results imply non-Markovian effects in price formation and when trading many stocks at the…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
Market Microstructure is the investigation of the process and protocols that govern the exchange of assets with the objective of reducing frictions that can impede the transfer. In financial markets, where there is an abundance of recorded…
In this study we examine the evolution of price, volume, and the bid-ask spread after extreme 15 minute intraday price changes on the NYSE and the NASDAQ. We find that due to strong behavioral trading there is an overreaction. Furthermore…
We propose a series of simple models for the microstructure of a double auction market without intermediaries. We specialize to those markets, such interdealer broker markets, which are dominated by professional traders, who trade mainly…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
We briefly review our recent studies on stochastic processes modelling internet on-line trading. We present a way to evaluate the average waiting time between the observation of the price in financial markets and the next price change,…
Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
Conventional models of matching markets assume that monetary transfers can clear markets by compensating for utility differentials. However, empirical patterns show that such transfers often fail to close structural preference gaps. This…
Commonly used limit order book attributes are empirically considered based on NASDAQ ITCH data. It is shown that some of them have the properties drastically different from the ones assumed in many market dynamics study. Because of this…
This study proposes a versatile model for the dynamics of the best bid and ask prices using an extended Hawkes process. The model incorporates the zero intensities of the spread-narrowing processes at the minimum bid-ask spread,…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
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…
Permutation approach is suggested as a method to investigate financial time series in micro scales. The method is used to see how high frequency trading in recent years has affected the micro patterns which may be seen in financial time…
In financial time series there are periods in which the value increases or decreases monotonically. We call those periods elemental trends and study the probability distribution of their duration for the indices DJIA, NASDAQ and IPC. It is…
In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved…
In this article we revisit the classic problem of tatonnement in price formation from a microstructure point of view, reviewing a recent body of theoretical and empirical work explaining how fluctuations in supply and demand are slowly…
We examine the dynamics of the bid and ask queues of a limit order book and their relationship with the intensity of trade arrivals. In particular, we study the probability of price movements and trade arrivals as a function of the quote…
In this survey, a short introduction in the recent discovery of log-normally distributed market-technical trend data will be given. The results of the statistical evaluation of typical market-technical trend variables will be presented. It…