Random Dynamics in Financial Markets
Random Dynamics in Financial Markets

Author: Cisem Bektur

Publisher:

Published: 2012

Total Pages:

ISBN-13:

DOWNLOAD EBOOK

We study evolutionary models of financial markets. In particular, we study an evolutionary market model with short-lived assets and an evolutionary model with long-lived assets. In the long-lived asset market, investors are allowed to use general dynamic investment strategies. We find sufficient conditions for the Kelly portfolio rule to dominate the market exponentially fast. Moreover, when investors use simple strategies but have incorrect beliefs, we show that the strategy which is "closer" to the Kelly rule cannot be driven out of the market. This means that this strategy will either dominate or at least survive, i.e., the relative market share does not converge to zero. In the market with short-lived assets, we study the dynamics when the states of the world are not identically distributed. This marks the first attempt to study the dynamics of the market when the probability of success changes according to the relative shares of investors. In this problem, we first study a skew product of the random dynamical system associates with the market dynamics. In particular, we compute the Lyapunov exponents of the skew product. This enables us to produce a "surviving" investment strategy, i.e., the investor who follows this rule will dominate the market or at least survive. All the mathematical tools in the thesis lie within the framework of random dynamical systems.

The Statistical Mechanics of Financial Markets
The Statistical Mechanics of Financial Markets

Author: Johannes Voit

Publisher: Springer Science & Business Media

Published: 2013-04-17

Total Pages: 298

ISBN-13: 3662051257

DOWNLOAD EBOOK

This textbook describes parallels between statistical physics and finance - both those established in the 100-year-long interaction between these disciplines, as well as new research results on capital markets. The random walk, well known in physics, is also the basic model in finance, upon which are built, for example, the Black--Scholes theory of option pricing and hedging, or methods of risk control using diversification. Here the underlying assumptions are discussed using empirical financial data and analogies to physical models such as fluid flows, turbulence, or superdiffusion. On this basis, new theories of derivative pricing and risk control can be formulated. Computer simulations of interacting agent models of financial markets provide insights into the origins of asset price fluctuations. Stock exchange crashes can be modelled in ways analogous to phase transitions and earthquakes. These models allow for predictions. This study edition has been updated with a presentation of several new and significant developments, e.g. the dynamics of volatility smiles and implied volatility surfaces, path integral approaches to option pricing, a new and accurate simulation scheme for options, multifractals, the application of nonextensive statistical mechanics to financial markets, and the minority game. Moreover, the book was scanned for and corrected from errors, both typographical and in presentation.

Chaos & Nonlinear Dynamics in the Financial Markets
Chaos & Nonlinear Dynamics in the Financial Markets

Author: Robert R. Trippi

Publisher: Robert Trippi

Published: 1995

Total Pages: 546

ISBN-13:

DOWNLOAD EBOOK

Computer disk illustrates behavior of several of the chaotic processes discussed in text. Assists the user in viewing the change in a system from unstable to stable states.

Handbook of Financial Markets: Dynamics and Evolution
Handbook of Financial Markets: Dynamics and Evolution

Author: Thorsten Hens

Publisher: Elsevier

Published: 2009-06-12

Total Pages: 607

ISBN-13: 0080921434

DOWNLOAD EBOOK

The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. Explains the market dynamics of asset prices, offering insights about asset management approaches Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics

Random Dynamical Systems in Finance
Random Dynamical Systems in Finance

Author: Anatoliy Swishchuk

Publisher: CRC Press

Published: 2016-04-19

Total Pages: 354

ISBN-13: 1439867194

DOWNLOAD EBOOK

The theory and applications of random dynamical systems (RDS) are at the cutting edge of research in mathematics and economics, particularly in modeling the long-run evolution of economic systems subject to exogenous random shocks. Despite this interest, there are no books available that solely focus on RDS in finance and economics. Exploring this

Dynamics of Markets
Dynamics of Markets

Author: Joseph L. McCauley

Publisher: Cambridge University Press

Published: 2004-05-06

Total Pages: 246

ISBN-13: 9780521824477

DOWNLOAD EBOOK

Text introducing a new empirically-based model of financial market dynamics.

The Econometrics of Financial Markets
The Econometrics of Financial Markets

Author: John Y. Campbell

Publisher: Princeton University Press

Published: 2012-06-28

Total Pages: 630

ISBN-13: 1400830214

DOWNLOAD EBOOK

The past twenty years have seen an extraordinary growth in the use of quantitative methods in financial markets. Finance professionals now routinely use sophisticated statistical techniques in portfolio management, proprietary trading, risk management, financial consulting, and securities regulation. This graduate-level textbook is intended for PhD students, advanced MBA students, and industry professionals interested in the econometrics of financial modeling. The book covers the entire spectrum of empirical finance, including: the predictability of asset returns, tests of the Random Walk Hypothesis, the microstructure of securities markets, event analysis, the Capital Asset Pricing Model and the Arbitrage Pricing Theory, the term structure of interest rates, dynamic models of economic equilibrium, and nonlinear financial models such as ARCH, neural networks, statistical fractals, and chaos theory. Each chapter develops statistical techniques within the context of a particular financial application. This exciting new text contains a unique and accessible combination of theory and practice, bringing state-of-the-art statistical techniques to the forefront of financial applications. Each chapter also includes a discussion of recent empirical evidence, for example, the rejection of the Random Walk Hypothesis, as well as problems designed to help readers incorporate what they have read into their own applications.

The Adaptive Markets Hypothesis
The Adaptive Markets Hypothesis

Author: Andrew W. Lo

Publisher: Oxford University Press

Published: 2024-02-22

Total Pages: 801

ISBN-13: 0192885693

DOWNLOAD EBOOK

The Adaptive Markets Hypothesis (AMH) presents a formal and systematic exposition of a new narrative about financial markets that reconciles rational investor behaviour with periods of temporary financial insanity. In this narrative, intelligent but fallible investors learn from and adapt to randomly shifting environments. Financial markets may not always be efficient, but they are highly competitive, innovative, and adaptive, varying in their degree of efficiency as investor populations and the financial landscape change over time. Andrew Lo and Ruixun Zhang develop the mathematical foundations of the AMH—a simple yet surprisingly powerful set of evolutionary models of behaviour—and then apply these foundations to show how the most fundamental economic behaviours that we take for granted can arise solely through natural selection. Drawing on recent advances in cognitive neuroscience and artificial intelligence, the book also explores how our brain affects economic and financial decision making. The AMH can be applied in many contexts, ranging from designing trading strategies, to managing risk and understanding financial crises, to formulating macroprudential policies to promote financial stability. This volume is a must read for anyone who has ever been puzzled and concerned by the behaviour of financial markets and the implications for their personal wealth, and seeks to learn how best to respond to such behaviour.