This research aims to investigate, through simulation models, how the interaction among agents in an artificial stock market can affect the dynamics of asset prices. Thus, the study follows a different methodology for the analysis of prices by exploring the simulation of agents' behavior in an...

We examine whether a put-call ratio, derived from a unique set of market data, can be used to predict directional moves in asset prices during various market conditions between March 2005 and December 2012. Our findings show: 1) specific market participant's options trading volume is a...

Backtesting stock market investment strategies is fraught with danger – for example, overfitting. The signal to noise ratio in stock markets is so low that overfitting is inevitable. Simulation offers a means of assessing and compensating for the dangers. It is not obvious at first how...

A Hidden Markov Model (HMM) is used to model the VIX (the Cboe Volatility Index). A 4- state Gaussian mixture is fitted to the VIX price history from 1990 to 2022. Using a growing window of training data, the price of the S&P500 is predicted and two trading algorithms are presented, based on the...

Following a trend of sustained and accelerated growth, the VIX futures and options market has become a closely followed, active and liquid market. The standard stochastic volatility models -- which focus on the modeling of instantaneous variance -- are unable to fit the entire term structure of...

The aim of this paper is to investigate the ability of the Dynamic Variance Gamma model, recently proposed by Bellini and Mercuri (2010), to evaluate option prices on the S&P500 index. We also provide a simple relation between the Dynamic Variance Gamma model and the Vix index. We use this...

Many efficient and accurate analytical methods for pricing American options now exist. However, while they can produce accurate option prices, they often do not give accurate critical stock prices. In this paper, we propose two new analytical approximations for American options based on the...

We consider a tractable affine stochastic volatility model that generalizes the seminal Heston (1993) model by augmenting it with jumps in the instantaneous variance process. In this framework, we consider options written on the realized variance, and we examine the impact of the distribution of...

Many efficient and accurate analytical methods for pricing American options now exist. However, while they can produce accurate option prices, they often do not give accurate critical stock prices. In this paper, we propose two new analytical approximations for American options based on the...

The quintic Ornstein-Uhlenbeck volatility model is a stochastic volatility model where the volatility process is a polynomial function of degree five of a single Ornstein-Uhlenbeck process with fast mean reversion and large vol-of-vol. The model is able to achieve remarkable joint fits of the...