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We investigate the relationship between ownership structure of financial assets and non-fundamental risk. An asset is fragile if its owners collectively have to buy or sell. Such assets are susceptibl...
The trade of a fixed stock can be regarded as the basic process that measures its momentary price. The stock price is exactly known only at the time of sale when the stock is between traders, that is,...
We construct a general stochastic process and prove weak convergence results. It is scaled in space and through the parameters of its distribution. We show that our simplified scaling is equivalent ...
The principle of absence of arbitrage opportunities allows obtaining the distribution of stock price fluctuations by maximizing its information entropy. This leads to a physical description of the u...
We show that in a large class of stochastic volatility models with additional skew-functions (local-stochastic volatility models) the tails of the cumulative distribution of the log-returns behave as...
We consider uncorrelated Stein-Stein, Heston, and Hull-White models and their perturbations by compound Poisson processes with jump amplitudes distributed according to a double exponential law. Simila...
We propose procedures for testing whether stock price processes are martingales based on limit order type betting strategies. We first show that the null hypothesis of martingale property of a stock p...
It is well-known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion.In the present paper we consider the inverse problem, i.e. given...
The stochastic exponential Zt = exp{Mt − M0 − (1/2)hM,Mit} of a continuous local martingale M is itself a continuous local martingale. We give a necessary and sufficient condition for the ...
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I ...
In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wid...
Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of invest...

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