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Statistical modelling across price and time scales: a quantitative approach to modern financial regulation

Objective

This project aims at providing a new quantitative approach to financial regulation, notably in the context of high frequency trading. The key idea of our method is to build relevant statistical models through price and time scales, connecting the microstructure of financial markets to the long term behavior of prices. Doing so, we will be able to understand and quantify the macroscopic consequences of regulatory measures modifying the microscopic design of the market. Succeeding in this modelling task will require to address several intricate statistical problems. In particular new results will be needed in the fields of limit theory for semi-martingales, multifractal processes, rough stochastic differential equations, Hawkes processes and high-dimensional statistics. Hence, through this project, we not only have the hope to provide groundbreaking tools for worldwide regulation of financial markets but, concurrently, to answer important and challenging mathematical problems. In term of analyzing concrete regulatory measures, particular attention will be devoted to the issue of the choice of a proper tick value, that is the minimal price increment allowed on a financial market. Indeed, the tick value is the tool which seems to be favored by most policy makers in order to regulate high frequency trading.

Field of science

  • /social sciences/economics and business/business and management/commerce
  • /natural sciences/mathematics/applied mathematics/statistics and probability
  • /natural sciences/mathematics/pure mathematics/mathematical analysis/differential equations

Call for proposal

ERC-2015-STG
See other projects for this call

Funding Scheme

ERC-STG - Starting Grant

Host institution

ECOLE POLYTECHNIQUE
Address
Route De Saclay
91128 Palaiseau Cedex
France
Activity type
Higher or Secondary Education Establishments
EU contribution
€ 1 165 625

Beneficiaries (2)

ECOLE POLYTECHNIQUE
France
EU contribution
€ 1 165 625
Address
Route De Saclay
91128 Palaiseau Cedex
Activity type
Higher or Secondary Education Establishments
SORBONNE UNIVERSITE

Participation ended

France
EU contribution
€ 0
Address
21 Rue De L'ecole De Medecine
75006 Paris
Activity type
Higher or Secondary Education Establishments