The Volume-Synchronized Probability of Informed trading (VPIN) metric is introduced by Easley, Lopez de Prado, and O'Hara (2011a) as a real-time indicator of order flow toxicity. They find the measure useful in monitoring order flow imbalances and conclude it may help signal impending market...

Financial crises are often characterized by sharp reductions in liquidity followed by cascades of falling prices. Researchers are making progress in work to understand the levels of liquidity on a daily basis, but understanding the vulnerability of liquidity to market shocks remains a challenge....

This article is a prologue to the article "Why Markets are Inefficient: A Gambling 'Theory' of Financial Markets for Practitioners an Theorists", available here: 'http://ssrn.com/abstract=2925532' http://ssrn.com/abstract=2925532. It presents important background for that article - why gambling...

The purpose of this article is to propose a new “theory,” the Strategic Analysis of Financial Markets (SAFM) theory, that explains the operation of financial markets using the analytical perspective of an enlightened gambler. The gambler understands that all opportunities for superior...

Algorithmic trading strategies for execution often focus on the individual agent who is liquidating/acquiring shares. When generalized to multiple agents, the resulting stochastic game is notoriously difficult to solve in closed-form. Here, we circumvent the difficulties by investigating a...

While a wide variety of hypotheses have been offered to explain the anomalous market phenomena known as a “Flash Crash”, there is as of yet no consensus among financial experts as to the sources of these sudden market collapses. In contrast to the behavior expected from standard financial...

I exploit information in the cross section of bid-ask spreads to develop a new measure of extreme event risk. Spreads embed tail risk information because liquidity providers require compensation for the possibility of sharp changes in asset values. I show that simple regressions relating spreads...

When a stock market crash is defined as the period from an index's prior peak until its recovery, crashes demonstrate empirical regularities in their scale and timing. For instance, measures of the duration, maximum decline, and lost value of crashes are very highly correlated. These...

This paper studies the undirected partial-correlation stock network for the Spanish market that considers the constituents of IBEX-35 as nodes and their partial correlations of returns as links. I propose a novel methodology that combines a recently developed variable selection method, Graphical...

We estimate a highly significant price of risk that forecasts global stock and bond returns as a nonlinear function of the CBOE Volatility Index (VIX). We show that countries' exposure to the global price of risk is related to macroeconomic risks as measured by output, credit, and inflation...