Search results for "Mark to model"
showing 3 items of 3 documents
Extreme value theory versus traditional GARCH approaches applied to financial data: a comparative evaluation
2013
Although stock prices fluctuate, the variations are relatively small and are frequently assumed to be normally distributed on a large time scale. But sometimes these fluctuations can become determinant, especially when unforeseen large drops in asset prices are observed that could result in huge losses or even in market crashes. The evidence shows that these events happen far more often than would be expected under the generalised assumption of normally distributed financial returns. Thus it is crucial to model distribution tails properly so as to be able to predict the frequency and magnitude of extreme stock price returns. In this paper we follow the approach suggested by McNeil and Frey …
Learning and the Price Dynamics of a Double-Auction Financial Market with Portfolio Traders
2006
In this paper we study the dynamics of price adjustments in an artificial market where portfolio traders with bounded rationality and limited resources interact through a continuous, electronic open book. The present work extends the model developed in [? ] introducing endogenous target individual portfolio holdings. We model the agents’ order-flow investment decision as an optimal choice given individual characteristics and the available information. We depart from the standard asset pricing framework in two ways. First, we assume that investors have imperfect information about the returns distribution. In particular, we assume that agents hold arbitrary priors about securities’ returns, w…
The Dynamics of Quote Prices in an Artificial Financial Market with Learning Effects
2007
In this paper we study the evolution of bid and ask prices in an electronic financial market populated by portfolio traders who optimally choose their allocation strategy on the basis of their views about market conditions. Recently, a growing literature has investigated the consequences of learning about the returns process1. There has been an increasing interest in analyzing what are the implications of relaxing the assumption that agents hold correct expectations. In particular, it has been asked the fundamental question of understanding if typical asset-pricing anomalies (like returns predictability, and excess volatility) can be generated by a learning process about the underlying econ…