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The influences of delay time on the stability of a market model with stochastic volatility

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  • Li, Jiang-Cheng
  • Mei, Dong-Cheng
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    Abstract

    The effects of the delay time on the stability of a market model are investigated, by using a modified Heston model with a cubic nonlinearity and cross-correlated noise sources. These results indicate that: (i) There is an optimal delay time τo which maximally enhances the stability of the stock price under strong demand elasticity of stock price, and maximally reduces the stability of the stock price under weak demand elasticity of stock price; (ii) The cross correlation coefficient of noises and the delay time play an opposite role on the stability for the case of the delay time <τo and the same role for the case of the delay time >τo. Moreover, the probability density function of the escape time of stock price returns, the probability density function of the returns and the correlation function of the returns are compared with other literatures.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0378437112009247
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    Bibliographic Info

    Article provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.

    Volume (Year): 392 (2013)
    Issue (Month): 4 ()
    Pages: 763-772

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    Handle: RePEc:eee:phsmap:v:392:y:2013:i:4:p:763-772

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    Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/

    Related research

    Keywords: Financial markets; Heston model; Time delay; Correlated noises; The mean escape time;

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