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On a universal mechanism for long ranged volatility correlations
Jean-Philippe Bouchaud, Irene Giardina, Marc Mezard
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice…
Option Pricing and Hedging with Temporal Correlations
Lorenzo Cornalba, Jean-Philippe Bouchaud, Marc Potters
We consider the problem of option pricing and hedging when stock returns are correlated in time. Within a quadratic-risk minimisation scheme, we obtain a general formula, valid for…
Force chain splitting in granular materials: a mechanism for large scale pseudo-elastic behaviour
J. -P. Bouchaud, P. Claudin, D. Levine +1
We investigate both numerically and analytically the effect of strong disorder on the large scale properties of the hyperbolic equations for stresses proposed in \protect\cite{bcc,…
Hedged Monte-Carlo: low variance derivative pricing with objective probabilities
Marc Potters, Jean-Philippe Bouchaud, Dragan Sestovic
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging…
Power-laws in economy and finance: some ideas from physics
Jean-Philippe Bouchaud
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the…
Hedging large risks reduces the transaction costs
Farhat Selmi, Jean-Philippe Bouchaud
As soon as one accepts to abandon the zero-risk paradigm of Black-Scholes, very interesting issues concerning risk control arise because different definitions of the risk become un…
Population dynamics in a random environment
Irene Giardina, Jean-Philippe Bouchaud, Marc Mezard
We investigate the competition between barrier slowing down and proliferation induced superdiffusion in a model of population dynamics in a random force field. Numerical results in…
Wealth condensation in a simple model of economy
Jean-Philippe Bouchaud, Marc Mezard
We introduce a simple model of economy, where the time evolution is described by an equation capturing both exchange between individuals and random speculative trading, in such a w…