Search results for "financial markets"
showing 10 items of 57 documents
Limit order placement as an utility maximization problem and the origin of power law distribution of limit order prices
2006
I consider the problem of the optimal limit order price of a financial asset in the framework of the maximization of the utility function of the investor. The analytical solution of the problem gives insight on the origin of the recently empirically observed power law distribution of limit order prices. In the framework of the model, the most likely proximate cause of this power law is a power law heterogeneity of traders' investment time horizons .
How does the market react to your order flow?
2012
We present an empirical study of the intertwined behaviour of members in a financial market. Exploiting a database where the broker that initiates an order book event can be identified, we decompose the correlation and response functions into contributions coming from different market participants and study how their behaviour is interconnected. We find evidence that (1) brokers are very heterogeneous in liquidity provision -- some are consistently liquidity providers while others are consistently liquidity takers. (2) The behaviour of brokers is strongly conditioned on the actions of {\it other} brokers. In contrast brokers are only weakly influenced by the impact of their own previous ord…
Parameter-free density functional for the correlation energy in two dimensions
2010
Accurate treatment of the electronic correlation in inhomogeneous electronic systems, combined with the ability to capture the correlation energy of the homogeneous electron gas, allows to reach high predictive power in the application of density-functional theory. For two-dimensional systems we can achieve this goal by generalizing our previous approximation [Phys. Rev. B 79, 085316 (2009)] to a parameter-free form, which reproduces the correlation energy of the homogeneous gas while preserving the ability to deal with inhomogeneous systems. The resulting functional is shown to be very accurate for finite systems with an arbitrary number of electrons with respect to numerically exact refer…
Colle-Salvetti-type local density functional for the exchange-correlation energy in two dimensions
2010
We derive an approximate local density functional for the exchange-correlation energy to be used in density-functional calculations of two-dimensional systems. In the derivation we employ the Colle-Salvetti wave function within the scheme of Salvetti and Montagnani [Phys. Rev. A 63, 052109 (2001)] to satisfy the sum rule for the exchange-correlation hole. We apply the functional for the two-dimensional homogeneous electron gas as well as to a set of quantum dots and find a very good agreement with exact reference data.
Semi-local density functional for the exchange-correlation energy of electrons in two dimensions
2010
We present a practical and accurate density functional for the exchange-correlation energy of electrons in two dimensions. The exchange part is based on a recent two-dimensional generalized-gradient approximation derived by considering the limits of small and large density gradients. The fully local correlation part is constructed following the Colle-Salvetti scheme and a Gaussian approximation for the pair density. The combination of these expressions is shown to provide an efficient density functional to calculate the total energies of two-dimensional electron systems such as semiconductor quantum dots. Excellent performance of the functional with respect to numerically exact reference da…
Statistical identification with hidden Markov models of large order splitting strategies in an equity market
2010
Large trades in a financial market are usually split into smaller parts and traded incrementally over extended periods of time. We address these large trades as hidden orders. In order to identify and characterize hidden orders we fit hidden Markov models to the time series of the sign of the tick by tick inventory variation of market members of the Spanish Stock Exchange. Our methodology probabilistically detects trading sequences, which are characterized by a net majority of buy or sell transactions. We interpret these patches of sequential buying or selling transactions as proxies of the traded hidden orders. We find that the time, volume and number of transactions size distributions of …
Multiscale Model Selection for High-Frequency Financial Data of a Large Tick Stock by Means of the Jensen–Shannon Metric
2014
Modeling financial time series at different time scales is still an open challenge. The choice of a suitable indicator quantifying the distance between the model and the data is therefore of fundamental importance for selecting models. In this paper, we propose a multiscale model selection method based on the Jensen–Shannon distance in order to select the model that is able to better reproduce the distribution of price changes at different time scales. Specifically, we consider the problem of modeling the ultra high frequency dynamics of an asset with a large tick-to-price ratio. We study the price process at different time scales and compute the Jensen–Shannon distance between the original…
A dynamic analysis of SP 500, FTSE 100 and EURO STOXX 50 indices under different exchange rates.
2018
In this study, we assess the dynamic evolution of short-term correlation, long-term cointe-gration and Error Correction Model (hereafter referred to as ECM)-based long-term Granger causality between each pair of US, UK, and Eurozone stock markets from 1980 to 2015 using the rolling-window technique. A comparative analysis of pairwise dynamic integration and causality of stock markets, measured in common and domestic currency terms, is conducted to evaluate comprehensively how exchange rate fluctuations affect the time-varying integration among the S&P 500, FTSE 100 and EURO STOXX 50 indices. The results obtained show that the dynamic correlation, cointegration and ECM-based long-run Gra…
Segmentation algorithm for non-stationary compound Poisson processes
2010
We introduce an algorithm for the segmentation of a class of regime switching processes. The segmentation algorithm is a non parametric statistical method able to identify the regimes (patches) of a time series. The process is composed of consecutive patches of variable length. In each patch the process is described by a stationary compound Poisson process, i.e. a Poisson process where each count is associated with a fluctuating signal. The parameters of the process are different in each patch and therefore the time series is non-stationary. Our method is a generalization of the algorithm introduced by Bernaola-Galván, et al. [Phys. Rev. Lett. 87, 168105 (2001)]. We show that the new algori…
COMPARISON OF TWO SIMPLIFICATION METHODS FOR SHORELINE EXTRACTION FROM DIGITAL ORTHOPHOTO IMAGES
2018
Abstract. The coastal ecosystems are very sensitive to external influences. Coastal resources such as sand dunes, coral reefs and mangroves has vital importance to prevent coastal erosion. Human based effects also threats the coastal areas. Therefore, the change of coastal areas should be monitored. Up-to-date, accurate shoreline information is indispensable for coastal managers and decision makers. Remote sensing and image processing techniques give a big opportunity to obtain reliable shoreline information. In the presented study, NIR bands of seven 1:5000 scaled digital orthophoto images of Riga Bay-Latvia have been used. The Object-oriented Simple Linear Clustering method has been utili…