arXiv · arXiv q-fin · 2022
The Spontaneous Symmetry breaking in Quantum Finance considers the martingale condition in the stock market as a vacuum state if we express the financial equations in the Hamiltonian form. The original analysis for this phenomena ignores completely the kinetic terms in the neighborhood of the minimal of the potential terms. This is correct in most of the cases. However, when we deal with the Martingale condition, it …
Ivan Arraut, Joao Alexandre Lobo Marques, Sergio Gomes
arXiv · arXiv q-fin · 2020
We analyze the phenomena of spontaneous symmetry breaking in Quantum Finance by using as a starting point the Black-Scholes (BS) and the Merton-Garman (MG) equations expressed in the Hamiltonian form. In this scenario the martingale condition (state) corresponds to the vacuum state which becomes degenerate when the symmetry of the system is spontaneously broken. We then analyze the broken symmetries of the system and…
Ivan Arraut, Alan Au, Alan Ching-biu Tse
arXiv · arXiv q-fin · 2010
We study the general model of self-financing trading strategies in illiquid markets introduced by Schoenbucher and Wilmott, 2000. A hedging strategy in the framework of this model satisfies a nonlinear partial differential equation (PDE) which contains some function g(alpha). This function is deep connected to an utility function. We describe the Lie symmetry algebra of this PDE and provide a complete set of reductio…
Ljudmila A. Bordag, Anna Mikaelyan
arXiv · arXiv q-fin · 2000
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in the stock market, using alternatives such as human psychology and behavior, bounded rationality, agent-based modeling and evolutionary game theory, expound that speculative and cr…
D. Sornette
arXiv · arXiv · 2026
Symmetry and entanglement are two fundamental concepts in quantum many-body physics. Their interplay is captured by symmetry-resolved entanglement, which decomposes the total entanglement into contributions from different symmetry sectors. Computing symmetry-resolved entanglement in strongly interacting higher-dimensional quantum systems remains challenging. Here, we formulate and implement an estimator-based quantum…
Kuangjie Chen, Weizhen Jia, Xiaopeng Li, René Meyer, Jiarui Zhao
arXiv · arXiv · 2024
The purpose of the research was to build an index of informational asymmetry with market and firm proxies that reflect the analysts' perception of the level of informational asymmetry of companies. The proposed method consists of the construction of an algorithm based on the Elo rating and captures the perception of the analyst that choose, between two firms, the one they consider to have better information. After we…
Roberto Frota Decourt, Heitor Almeida, Philippe Protin, Matheus R. C. Gonzalez
arXiv · arXiv · 2024
Shareholders' expectations of stock returns and fluctuations are constantly changing due to restrictions in financial status and undesirable capital structure, which constrain managers to limit the changes in price trends in order to cover the risk instigated and infused by the unfavorable situation. The present research examines the moderating impact of information asymmetry on the relationship between capital struc…
Masoud Taherinia, Mehrdad Matin, Jamal Valipour, Kavian Abdolahi, Peyman Shouryabi
arXiv · arXiv · 2020
This study investigates the impacts of asymmetry on the modeling and forecasting of realized volatility in the Japanese futures and spot stock markets. We employ heterogeneous autoregressive (HAR) models allowing for three types of asymmetry: positive and negative realized semivariance (RSV), asymmetric jumps, and leverage effects. The estimation results show that leverage effects clearly influence the modeling of re…
Daiki Maki, Yasushi Ota
arXiv · arXiv · 2018
We describe society as a nonequilibrium probabilistic system: N individuals occupy W resource states in it and produce entropy S over definite time periods. Resulting thermodynamics is however unusual because a second entropy, H, measures a typically social feature, inequality or diversity in the distribution of available resources. A symmetry phase transition takes place at Gini values 1/3, where realistic distribut…
J. Rosenblatt
arXiv · arXiv · 2015
There are some statistical anomalies in the Chinese stock market, i.e., positive return skewness, anti-leverage effect (positive returns induce higher volatility than negative returns); and reverse volatility asymmetry (contemporaneous return-volatility correlation is positive). In this paper, we first confirm the existence of these anomalies using daily firm-level stock return data on the raw returns, excess returns…
Liang Wu, Jingyi Luo, Yingkai Tang, Gregory Bardes
arXiv · arXiv · 2015
We point out a stunning time asymmetry in the short time cross correlations between intra-day and overnight volatilities (absolute values of log-returns of stock prices). While overnight volatility is significantly (and positively) correlated with the intra-day volatility during the \textit{following} day (allowing thus non-trivial predictions), it is much less correlated with the intra-day volatility during the \tex…
Rubina Zadourian, Peter Grassberger
arXiv · arXiv · 2011
The asymmetric price impact between the institutional purchases and sales of 32 liquid stocks in Chinese stock markets in year 2003 is carefully studied. We analyze the price impact in both drawup and drawdown trends with consecutive positive and negative daily price changes, and test the dependence of the price impact asymmetry on the market condition. For most of the stocks institutional sales have a larger price i…
Fei Ren, Li-Xin Zhong
arXiv · arXiv q-fin · 2025
Financial markets exhibit an apparent paradox: while directional price movements remain largely unpredictable--consistent with weak-form efficiency--the magnitude of price changes displays systematic structure. Here we demonstrate that real-time order-flow entropy, computed from a 15-state Markov transition matrix at second resolution, predicts the magnitude of intraday returns without providing directional informati…
Mainak Singha
arXiv · arXiv · 2018
We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism. Using a linear market impact model, this produces a non-linear two-parametric extension of the classical Geometric Brownian Motion (GBM) model, that we call the "Quantum Equilibriu…
Igor Halperin, Matthew Dixon
arXiv · arXiv q-fin · 2022
There is substantial empirical evidence showing the fundamental portfolio outperforming the market portfolio. Here a theoretical foundation is laid that supports this empirical research. Assuming stock prices revert around fundamental prices with sufficient strength and symmetry, the fundamental portfolio outperforms the market portfolio in expectation. If reversion toward the fundamental price is not sufficiently st…
Hayden Brown
arXiv · arXiv q-fin · 2016
We define risk-free portfolios using three gauge invariant differential operators that require such portfolios to be insensitive to price changes, to be self-financing, and to produce a zero real return so there are no risk-free profits. This definition identifies the risk-free rate as the return of an infinitely diversified portfolio rather than as an arbitrary external parameter. The risk-free rate measures the rat…
Martin Gremm
arXiv · arXiv q-fin · 2003
In a recent comment (Johansen A 2003 An alternative view, Quant. Finance 3: C6-C7, cond-mat/0302141), Anders Johansen has criticized our methodology and has questioned several of our results published in [Sornette D and Zhou W-X 2002 The US 2000-2002 market descent: how much longer and deeper? Quant. Finance 2: 468-81, cond-mat/0209065] and in our two consequent preprints [cond-mat/0212010, physics/0301023]. In the p…
D. Sornette, W. -X. Zhou
arXiv · arXiv · 2026
Classical market-making strategies based on stochastic control, such as the Avellaneda-Stoikov and the Guéant-Lehalle-Fernandez-Tapia (GLFT) extension, provide closed-form quoting rules, but rest on assumptions that break down at realistic microstructure timescales. One of them is that order flow is stationary, while empirical evidence points to the existence of regimes, possibly associated with algorithmic execution…
Felipe Moret, Fabrizio Lillo