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Coupled Price–Volume Equity Models with Auto-Induced Regime Switching

2023-11-17Artigo científico Acesso aberto
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dc.contributor.authorEsquível, Manuel L.
dc.contributor.authorKrasii, Nadezhda P.
dc.contributor.authorMota, Pedro P.
dc.contributor.authorShamraeva, Victoria V.
dc.contributor.institutionCMA - Centro de Matemática e Aplicações
dc.contributor.institutionDM - Departamento de Matemática
dc.contributor.pblMDPI - Multidisciplinary Digital Publishing Institute
dc.date.accessioned2023-12-11T22:44:57Z
dc.date.available2023-12-11T22:44:57Z
dc.date.issued2023-11-17
dc.descriptionFunding Information: For the first three authors, this work was partially supported through the project of the Centro de Matemática e Aplicações, UID/MAT/00297/2020, financed by the Fundação para a Ciência e a Tecnologia (Portuguese Foundation for Science and Technology). Publisher Copyright: © 2023 by the authors.
dc.description.abstractIn this work, we present a rigorous development of a model for the Price–Volume relationship of transactions introduced in 2009. For this development, we rely on the precise formulation of diffusion auto-induced regime-switching models presented in our previous work of 2020. The auto-induced regime-switching models referred to may be based on a finite set of stochastic differential equations (SDE)—all defined on the same bounded time interval—and a sequence of interlacing stopping times defined by the hitting threshold times of the trajectories of the solutions of the SDE. The coupling between price and volume—which we take as a proxy of liquidity—is assumed to be the following: the regime switching in the price variable occurs at the stopping times for which there is a change of region—in the product state space of price and liquidity—for the liquidity variable (and vice versa). The regimes may be defined parametrically—that is, the SDE coefficients keep the same functional form but with varying parameters—or the functional form of the SDE coefficients may change with each regime. By using the same noise source for both the price and the liquidity regime-switching models—volume (liquidity), which, in general, is not a tradable asset—we ensure that despite incorporating information on liquidity, the price part of the coupled model can be assumed to be arbitrage free and complete, allowing the pricing and hedging of derivatives in a simple way.en
dc.description.versionpublishersversion
dc.description.versionpublished
dc.format.extent20
dc.format.extent1565006
dc.identifier.doi10.3390/risks11110203
dc.identifier.issn2227-9091
dc.identifier.otherPURE: 78010701
dc.identifier.otherPURE UUID: a0121ab0-fa5c-47e7-994a-f1155fb1826f
dc.identifier.otherScopus: 85178108461
dc.identifier.urihttp://hdl.handle.net/10362/161108
dc.identifier.urlhttps://www.scopus.com/pages/publications/85178108461
dc.language.isoeng
dc.peerreviewedyes
dc.subjectauto-induced regime switching diffusions
dc.subjectliquidity
dc.subjectprice
dc.subjectregime switching diffusions
dc.subjectvolume of transactions
dc.subjectAccounting
dc.subjectEconomics, Econometrics and Finance (miscellaneous)
dc.subjectStrategy and Management
dc.titleCoupled Price–Volume Equity Models with Auto-Induced Regime Switchingen
dc.typejournal article
degois.publication.firstPage1
degois.publication.issue11
degois.publication.lastPage20
degois.publication.titleRisks
degois.publication.volume11
dspace.entity.typePublication
rcaap.rightsopenAccess

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