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

Informazioni relative al progetto

STAQAMOF

ID dell’accordo di sovvenzione: 679836

DOI

10.3030/679836

Progetto chiuso

Data della firma CE 15 Dicembre 2015

Data di avvio 1 Ottobre 2016

Data di completamento 30 Settembre 2021

Finanziato da

• EXCELLENT SCIENCE - European Research Council (ERC)

Costo totale

€ 1 165 625,00

Contributo UE

€ 1 165 625,00

Coordinato da

ECOLE POLYTECHNIQUE
France

Periodic Reporting for period 4 - STAQAMOF (Statistical modelling across price and time scales: a quantitative approach to modern financial regulation)

Periodo di rendicontazione: 2021-04-01 al 2021-09-30

Sintesi del contesto e degli obiettivi generali del progetto

In this project, we aim at solving important regulation issues on financial markets. Our approach in non-conventional in the sense that we use a financial engineering viewpoint: using tools from probability, statistics and stochastic control, we express important questions as clear and well-posed mathematical problems and try to provide solutions to them, paying of course attention to interpretation of our results.

We particularly focus on issues arising at the microstructure level: mitigating the effects of high frequency trading, optimal tick sizes, make-take fees systems, auctions, design of limit order books; and on the modelling and understanding of the volatility process

Lavoro eseguito dall’inizio del progetto fino alla fine del periodo coperto dalla relazione e principali risultati finora ottenuti

- Design of new, parsimonious models for the volatility process (called rough volatility models), together with associated pricing and hedging procedures. These models clearly outperform standard models in term of risk management.

- Understanding the rough nature of the volatility.

- Design of new and more efficient market design mechanisms at the microstructure level: optimal take sizes, make-take fees, auctions

- Building a framework enabling financial regulator to assess the impact of the various market participants on overall market quality.

- Design of an order book model leading to improved strategies in term of inventory risk.

Progressi oltre lo stato dell’arte e potenziale impatto previsto (incluso l’impatto socioeconomico e le implicazioni sociali più ampie del progetto fino ad ora)

We expect to continue rethinking financial regulation. The natural next step is probably to focus on derivatives products. We wish to find ways to design them optimally in order to guarantee market users the best possible tools for risk management. A principal/agent type approach should be quite suitable to solve these new issues.

We also wish to understand other features of the volatility process, such as the so-called Zumbach effect, and relate them to the behavior of financial agents at the microscopic level. Quadratic Hawkes processes could probably represent a relevant modelling tool here.

Ecole Polytechnique