We study theoretical and empirical aspects of the mean exit time of financial time series. The theoretical modeling is done within the framework of continuous time random walk. We empirically verify that the mean exit time follows a quadratic scaling law and it has associated a pre-factor which...

We study financial distributions within the framework of the continuous time random walk (CTRW). An earlier approach is modified to account for the possibility of obtaining the distribution of daily or longer-time prices, in addition to the existing model for intraday prices. We thus treat both...

We study the activity, i.e., the number of transactions per unit time, of financial markets. Using the diffusion entropy technique we show that the autocorrelation of the activity is caused by the presence of peaks whose time distances are distributed following an asymptotic power law which...

For environmental problems such as global warming future costs must be balanced against present costs. This is traditionally done using an exponential function with a constant discount rate, which reduces the present value of future costs. The result is highly sensitive to the choice of discount...

We study the effect of heavy tails and correlations on the price of the one of the simplest financial derivative: the European call option. We see that both effects have opposite and nontrivial consequences on the price of the derivatives.

We compare the most common stochastic volatility models such as the Ornstein–Uhlenbeck (OU), the Heston and the exponential OU models. We try to decide which is the most appropriate one by studying their volatility autocorrelation and leverage effect, and thus outline the limitations of each...

Option pricing is mainly based on ideal market conditions which are well represented by the geometric Brownian motion (GBM) as market model. We study the effect of non-ideal market conditions on the price of the option. We focus our attention on two crucial aspects appearing in real markets: the...

We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time τ⩾0. This is accomplished by assuming that the underlying noise in the system is derived by an Ornstein-Uhlenbeck, rather than from a...