arXiv · arXiv q-fin · 2026
When is a large trade news, and when is it a liquidity shock? We study this question in a sequential competitive limit order book with asymmetric information. In our model, liquidity suppliers observe aggregate order flow but not its decomposition into informed demand and uninformed liquidity demand. We model uninformed order flow with Student-$t$ tails, interpreted as a reduced form for rare liquidity regimes. The t…
Umut Çetin, Mingwei Lin, Giulia Livieri
arXiv · arXiv q-fin · 2015
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the probability of large portfolio losses. With more than 400 stocks to choose from, our study seems to be the first application of extreme value techniques in portfolio management on a l…
Georg Mainik, Georgi Mitov, Ludger Rüschendorf
arXiv · arXiv q-fin · 2026
Taiwan's central role in global semiconductor manufacturing exposes Taiwan-related ETFs to technology concentration, geopolitical uncertainty, and supply-chain disruptions, resulting in return distributions characterized by heavy tails, volatility clustering, and asymmetric responses to negative shocks. This paper analyzes thirty U.S.-listed ETFs with Taiwan exposure from February 2015 to February 2025 using tail-ris…
Ting-Jung Lee, Abootaleb Shirvani, Farzana Afroz, Svetlozar T. Rachev, Frank J. Fabozzi
arXiv · arXiv · 2014
We revisit the problem of pricing options with historical volatility estimators. We do this in the context of a generalized GARCH model with multiple time scales and asymmetry. It is argued that the reason for the observed volatility risk premium is tail risk aversion. We parametrize such risk aversion in terms of three coefficients: convexity, skew and kurtosis risk premium. We propose that option prices under the r…
Samuel E. Vazquez
arXiv · arXiv · 2026
We test whether five widely promoted retail signal families - trend, oscillator, candlestick, volume, and calendar rules - deliver a positive, economically meaningful, net-of-cost, and survivable edge. Practical viability is the conjunction of three predeclared gates: statistical edge after multiplicity correction, economic viability after trading costs, and finite-bankroll survival under leverage. Exposure-matched b…
Adam Darmanin
arXiv · arXiv · 2026
Deep generative models are increasingly used as simulators for downstream decision-making under data scarcity, but in risk-sensitive applications their usefulness depends on rare adverse scenarios rather than typical samples. Standard generative objectives prioritize bulk distributional fidelity, leaving low-probability tails vulnerable to localized optimization noise and making tail-dependent functionals unstable un…
Shuning Zhao, Patrick Wong, Leran Zhang, Xiaolin Hu
arXiv · arXiv q-fin · 2026
We study a one period limit order market with informed traders, noise traders, and competitive liquidity suppliers, in which the number of informed traders is random. Liquidity suppliers know the distribution of the informed trader count, but not its realization, and therefore face uncertainty about both the presence and the intensity of informed trading. We characterize equilibrium by a fixed point integral equation…
Umut Çetin, Mingwei Lin
arXiv · arXiv q-fin · 2025
This study examines how institutional differences and external crises shape volatility dynamics in emerging Asian stock markets. Using daily stock index returns for Indonesia, Malaysia, and the Philippines from 2010 to 2024, we estimate EGARCH(1,1) and TGARCH(1,1) models in a by-window design. The sample is split into the 2013 Taper Tantrum, the 2020-2021 COVID-19 period, the 2022-2023 rate-hike cycle, and tranquil p…
Junlin Yang
arXiv · arXiv q-fin · 2020
Crowded trades by similarly trading peers influence the dynamics of asset prices, possibly creating systemic risk. We propose a market clustering measure using granular trading data. For each stock the clustering measure captures the degree of trading overlap among any two investors in that stock. We investigate the effect of crowded trades on stock price stability and show that market clustering has a causal effect …
Marc van Kralingen, Diego Garlaschelli, Karolina Scholtus, Iman van Lelyveld
arXiv · arXiv q-fin · 2011
We empirically study the trading activity in the electronic on-book segment and in the dealership off-book segment of the London Stock Exchange, investigating separately the trading of active market members and of other market participants which are non-members. We find that (i) the volume distribution of off-book transactions has a significantly fatter tail than the one of on-book transactions, (ii) groups of member…
Angelo Carollo, Gabriella Vaglica, Fabrizio Lillo, Rosario N. Mantegna
arXiv · arXiv q-fin · 2011
We study the daily trading volume volatility of 17,197 stocks in the U.S. stock markets during the period 1989--2008 and analyze the time return intervals $τ$ between volume volatilities above a given threshold q. For different thresholds q, the probability density function P_q(τ) scales with mean interval <τ> as P_q(τ)=<τ>^{-1}f(τ/<τ>) and the tails of the scaling function can be well approximated by a power-law f(x…
Wei Li, Fengzhong Wang, Shlomo Havlin, H. Eugene Stanley
arXiv · arXiv · 2019
The electronic platform has been increasingly popular for executing large corporate bond orders by asset managers, who in turn have to assess the quality of their executions via Transaction Cost Analysis (TCA). One of the challenges in TCA is to build a realistic benchmark for the expected transaction cost and to characterize the price impact of each individual trade with given bond characteristics and market conditi…
Xin Guo, Charles-Albert Lehalle, Renyuan Xu
arXiv · arXiv · 2026
This paper develops a three-currency Heath-Jarrow-Morton framework in which corporate credit is treated as a separate economy, connected to the nominal and real economies through synthetic inflation and credit exchange rates. The framework produces a testable identity. Under joint no-arbitrage, the credit spread of an issuer expressed over the inflation-rateindexed risk-free curve equals the same issuer's credit spre…
Raphael Coelho
arXiv · arXiv · 2016
We take the holistic approach of computing an OTC claim value that incorporates credit and funding liquidity risks and their interplays, instead of forcing individual price adjustments: CVA, DVA, FVA, KVA. The resulting nonlinear mathematical problem features semilinear PDEs and FBSDEs. We show that for the benchmark vulnerable claim there is an analytical solution, and we express it in terms of the Black-Scholes for…
Damiano Brigo, Cristin Buescu, Marek Rutkowski
arXiv · arXiv · 2026
Artificial transaction generation remains an important source of potential market manipulation on cryptocurrency exchanges, as it may distort reported liquidity and reduce market transparency. This study proposes a diagnostic framework for detecting unusual trading patterns based on complexity and statistical-structure measures derived from high-frequency trade-level data. The analysis considers log-returns, trading …
Jakub Zwydak, Marcin Wątorek, Jarosław Kwapień, Stanisław Drożdż
arXiv · arXiv · 2026
We provide a large-scale empirical audit of DEX routing using 2.98 million WETH-USDC swaps on Ethereum. Comparing realized routes with optimized benchmarks, we measure an average shortfall of 2.02 bps per trade or \$24 million. To attribute losses, we introduce three reproducible optimal benchmarks: a Support-Constrained Optimum (SCO) that evaluates split quality conditional on the pools actually used; a Full-Venue O…
Weiye Xi, Ciamac C. Moallemi
arXiv · arXiv · 2026
Magnetohydrodynamic (MHD) phenomena play a pivotal role in the design and operation of nuclear fusion systems, where electrically conducting fluids (such as liquid metals or molten salts employed in reactor blankets) interact with magnetic fields of varying intensity and orientation, influencing the resulting flow dynamics. The numerical solution of MHD models entails the resolution of highly nonlinear, multiphysics …
M. Lo Verso, C. Introini, E. Cervi, L. Savoldi, J. N. Kutz
arXiv · arXiv · 2026
Generating synthetic financial time series that preserve the statistical properties of real market data is essential for stress testing, risk model validation, and scenario design. Existing approaches struggle to simultaneously reproduce heavy-tailed distributions, negligible linear autocorrelation, and persistent volatility clustering. We developed a hybrid hidden Markov framework that discretized excess growth rate…
Abdulrahman Alswaidan, Jeffrey D. Varner