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A platform for research: civil engineering, architecture and urbanism
Microstructures of correlated financial markets
In econophysics, physicists apply physical theories and methods to address economics problems. Due to an enormous amount of available data, financial markets can be statistically analyzed by physicists. The applied methods find their applications also in the context of other complex systems. In particular, with the development of the high-frequency trading, the market microstructure has gained growing attention. In this thesis, we will focus on the microstructure of financial markets, particularly on the correlation of order flow, the price impact and the dependence of demands. We begin by developing a method to identify trade signs with a TAQ data set. With the identified trade signs, we carry out an analysis of empirical data for the price cross-response to trades and the cross-correlation of trade signs. To obtain a stable observation, we also average them. The average cross-correlation of trade signs turns out to be long memory. Meanwhile, the non-vanishing cross-response reflects non-Markovian features of prices. According to the average cross-responses, we identify the influencing and influenced stocks. We then extend the price impact model of Bouchaud et al. (2004) to interpret our empirical results. The extended model contains the impacts of traded volumes, which are empirically revealed as power-law functions. The model also includes a self- and a cross-impact function of time lag. To quantify them, we propose a construction to fix the parameters and employ a diffusion function to corroborate the parameters. We thus quantify and interpret the price impacts in terms of the temporary and permanent components. We further extend the framework of trading strategies of Gatheral (2010) from single stocks to the two-dimensional case. Thus, we can introduce the cross-impact to the strategy for executing two round-trip trades of two stocks. We apply the strategy to a specific case, in which we quantify the cross-impacts with empirical data and give a view of how the cross-impact affect the trading strategy. We ...
Microstructures of correlated financial markets
In econophysics, physicists apply physical theories and methods to address economics problems. Due to an enormous amount of available data, financial markets can be statistically analyzed by physicists. The applied methods find their applications also in the context of other complex systems. In particular, with the development of the high-frequency trading, the market microstructure has gained growing attention. In this thesis, we will focus on the microstructure of financial markets, particularly on the correlation of order flow, the price impact and the dependence of demands. We begin by developing a method to identify trade signs with a TAQ data set. With the identified trade signs, we carry out an analysis of empirical data for the price cross-response to trades and the cross-correlation of trade signs. To obtain a stable observation, we also average them. The average cross-correlation of trade signs turns out to be long memory. Meanwhile, the non-vanishing cross-response reflects non-Markovian features of prices. According to the average cross-responses, we identify the influencing and influenced stocks. We then extend the price impact model of Bouchaud et al. (2004) to interpret our empirical results. The extended model contains the impacts of traded volumes, which are empirically revealed as power-law functions. The model also includes a self- and a cross-impact function of time lag. To quantify them, we propose a construction to fix the parameters and employ a diffusion function to corroborate the parameters. We thus quantify and interpret the price impacts in terms of the temporary and permanent components. We further extend the framework of trading strategies of Gatheral (2010) from single stocks to the two-dimensional case. Thus, we can introduce the cross-impact to the strategy for executing two round-trip trades of two stocks. We apply the strategy to a specific case, in which we quantify the cross-impacts with empirical data and give a view of how the cross-impact affect the trading strategy. We ...
Microstructures of correlated financial markets
Wang, Shanshan (author) / Guhr, Thomas
2017-10-16
Theses
Electronic Resource
English
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