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Apparent criticality and calibration issues in the Hawkes self-excited point process model : application to high-frequency financial data

Filimonov, Vladimir; Sornette, Didier - 2013

We present a careful analysis of possible issues of the application of the self-excited Hawkes process to high-frequency financial data and carefully analyze a set of effects that lead to significant biases in the estimation of the "criticality index'' n that quantifies the degree of endogeneity...

Persistent link: https://www.econbiz.de/10010257507

On the Predictability of Stock Market Bubbles : Evidence from LPPLS ConfidenceTM Multi-Scale Indicators

Demirer, Riza - 2018

We examine the predictive power of market-based indicators over the positive and negative stock market bubbles via an application of the LPPLS Confidence TM Multi-scale Indicators to the S&P 500 index. We find that the LPPLS framework is able to successfully capture, ex-ante, some of the...

Persistent link: https://www.econbiz.de/10012931948

Modified profile likelihood inference and interval forecast of the burst of financial bubbles

Filimonov, Vladimir; Demos, Guilherme; Heinimann, Hans … - 2016

We present a detailed methodological study of the application of the modified profile likelihood method for the calibration of nonlinear financial models characterised by a large number of parameters. We apply the general approach to the Log-Periodic Power Law Singularity (LPPLS) model of...

Persistent link: https://www.econbiz.de/10011514498

Forecasting financial crashes : a dynamic risk management approach

Gerlach, Jan-Christian; Zhao, Dongshuai; Sornette, Didier - 2020

Since 2009, stock markets have resided in a long bull market regime. Passive investment strategies have succeeded during this low-volatility growth period. From 2018 on, however, there was a transition into a more volatile market environment interspersed by corrections increasing in amplitude...

Persistent link: https://www.econbiz.de/10012419688

Power law scaling and "Dragon-Kings'' in distributions of intraday financial drawdown

Filimonov, Vladimir; Sornette, Didier - 2014

We investigate the distributions of e-drawdowns and e-drawups of the most liquid futures financial contracts of the world at time scales of 30 seconds. The e-drawdowns (resp. e-drawups) generalise the notion of runs of negative (resp. positive) returns so as to capture the risks to which...

Persistent link: https://www.econbiz.de/10010412365

Comparing ask and transaction prices in the Swiss housing market

Ahmed, Ahmed; Ardila, Diego; Sanadgol, Dorsa; Sornette, … - 2016

We analyze the relationship between ask and transaction prices in the Swiss residential real estate market over the 2005-2015 period. First, we present strong evidence that ask and transaction prices are co-integrated across different market segments, but they do not Granger-cause one another....

Persistent link: https://www.econbiz.de/10011626361

Awareness of Crash Risk Improves Kelly Strategies in Simulated Financial Time Series

Gerlach, J-C - 2020

(2018). The price process is defined as a geometric random walk combined with jumps modelled by separate, discrete … jumps are proportional to the bubble size. Thus, the jumps tend to efficiently bring back excess bubble prices close to a … “normal” or fundamental value (“efficient crashes”). This is different from existing processes studied that assume jumps that …

Persistent link: https://www.econbiz.de/10012836362

On the directional destabilizing feedback effects of option hedging

Sornette, Didier; Ulmann, Florian Michael Till; Wehrli, … - 2022

We investigate the feedback effect of option hedging activity on the stability of the price of the underlying. While previous literature has focused on the effect of hedging activity on the volatility of the underlying, this paper focuses on directional instabilities arising from feedback...

Persistent link: https://www.econbiz.de/10013192086

Super-exponential endogenous bubbles in an equilibrium model of fundamentalist and chartist traders

Kaizoji, Taisei; Leiss, Matthias; Saichev, Alexander; … - In: Journal of Economic Behavior & Organization 112 (2015) C, pp. 289-310

We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which fundamentalist and chartist traders co-exist. Fundamentalists form expectations on the return and risk of a risky asset and maximize their constant relative risk aversion expected utility...

Persistent link: https://www.econbiz.de/10011263924

The acceleration effect and gamma factor in asset pricing

Ardila, Diego; Forró, Zalán; Sornette, Didier - 2015

We report strong evidence that changes of momentum, i.e. "acceleration", defined as the first difference of successive returns, provide better performance and higher explanatory power than momentum. The corresponding Γ-factor explains the momentum-sorted portfolios entirely but not the reverse....

Persistent link: https://www.econbiz.de/10011411974