High-frequency dynamics of the microscopial structure in financial markets

Vicente González, Javier

Publication:
High-frequency dynamics of the microscopial structure in financial markets

dc.contributor.advisor	Farmer, Doyne
dc.contributor.advisor	Tapia, Mikel
dc.contributor.author	Vicente González, Javier
dc.contributor.departamento	UC3M. Departamento de Matemáticas	es
dc.date.accessioned	2011-11-10T11:10:03Z
dc.date.available	2011-11-10T11:10:03Z
dc.date.issued	2011-05
dc.date.submitted	2011-06-30
dc.description.abstract	In the first part of this thesis, I address the classical problem of asset price dynamics based on a new theoretical framework developed for nonequilibrium physical systems. This problem is mainly relevant for two reasons. First, because understanding the true distribution of returns is important for asset allocation, risk management, and option pricing. Second, because in spite of all the effort in determining the origin of non-Gaussian returns no conclusive result has been achieved yet. The most important result of this part is the demostration that the non-Gaussian shape and stable scaling of the returns distribution are due to slow, but significant, fluctuations in volatility. Futhermore, this result suggests that stock price fluctuations are universal, and that return distributions can be described by one functional form. In the second part, I present an empirical study about the execution of large orders in two stock exchanges: the London Stock Exchange, and the Spanish Stock Exchange. This type of orders can cause a tremendous impact because they are larger than the available liquidity in the order book at a time. For this reason, they are split to minimize transaction costs. Market price impact is the basic factor of these costs, so an accurate description of its functional form is necessary to any optimal execution. The most important result in this part is the empirical determination of this functional form in two markets and the finding of a common behavior in both markets that can be summarized into a concave temporary impact, roughly described by a square root function of the hidden order size, and a price reversion after the completion of the hidden order making permanent impact equal to roughly half of the temporary impact.
dc.format.mimetype	application/pdf
dc.identifier.uri	https://hdl.handle.net/10016/12549
dc.language.iso	eng
dc.rights	Atribución-NoComercial-SinDerivadas 3.0 España
dc.rights.accessRights	open access
dc.rights.uri	http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.subject.eciencia	Matemáticas
dc.subject.other	Price dynamics
dc.subject.other	Financial markets
dc.subject.other	Nonequilibrium physical systems
dc.subject.other	Non-Gaussian distributions
dc.title	High-frequency dynamics of the microscopial structure in financial markets
dc.type	doctoral thesis	*
dc.type.review	PeerReviewed
dspace.entity.type	Publication