In this paper we present a simple closed form stock price formula, which captures empirical regularities of high frequency trading (HFT), based on two factors: (1) exposure to hedge factor; and (2) hedge factor volatility. Thus, the parsimonious formula is not based on fundamental valuation. For...

In this article, the author presents a model of distributional properties of returns on financial instruments tied to ETFs via high-frequency statistical arbitrage. As the author's model shows, the securities subject to an ETF arbitrage exhibit a well-defined behavior, largely dependent on the...

This paper presents a tractable model of non-linear dynamics of market returns using a Langevin approach.Due to non-linearity of an interaction potential, the model admits regimes of both small and large return fluctuations. Langevin dynamics are mapped onto an equivalent quantum mechanical (QM)...

According to the financial press, firms with low leverage have lower distress risk due to their reduced exposure to the credit market, especially during credit crises. Compared to their conventional and socially responsible (SRI) counterparts, sharia compliant (SC) stocks are low-leverage...

The principles of behavioral psychology can explain how crashes occur. In particular, the concept of "stimulus generalization" tells us that organisms tend to respond in the same way to similar stimuli. In a crash, or pre-crash, context, several stimuli - including rising prices, above-average...

Australian Steve Keen was, in fact, one of just 13 registered economists , out of a global total of around 36,000 (yes that really comes out as 0.04%), who actually anticipated the global financial crisis.Knowing this, I think it’s almost impossible not to want to read his latest book,...

This paper presents an application of a recently developed approach by Matteson and James (2012) for the analysis of change points in a data set, namely major financial market indices converted to financial return series. The general problem concerns the inference of a change in the distribution...

This paper features the application of a novel and recently developed method of statistical and mathematical analysis to the assessment of financial risk: namely Regular Vine copulas. Dependence modeling using copulas is a popular tool in financial applications, but is usually applied to pairs...