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An introduction to statistical finance

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  • Bouchaud, Jean-Philippe

Abstract

We summarize recent research in a rapid growing field, that of statistical finance, also called ‘econophysics’. There are three main themes in this activity: (i) empirical studies and the discovery of interesting universal features in the statistical texture of financial time series, (ii) the use of these empirical results to devise better models of risk and derivative pricing, of direct interest for the financial industry, and (iii) the study of ‘agent-based models’ in order to unveil the basic mechanisms that are responsible for the statistical ‘anomalies’ observed in financial time series. We give a brief overview of some of the results in these three directions.

Suggested Citation

  • Bouchaud, Jean-Philippe, 2002. "An introduction to statistical finance," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 313(1), pages 238-251.
  • Handle: RePEc:eee:phsmap:v:313:y:2002:i:1:p:238-251
    DOI: 10.1016/S0378-4371(02)01039-7
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    References listed on IDEAS

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    1. Jean-Philippe Bouchaud & Nicolas Sagna & Rama Cont & Nicole El-Karoui & Marc Potters, 1999. "Phenomenology of the interest rate curve," Applied Mathematical Finance, Taylor & Francis Journals, vol. 6(3), pages 209-232.
    2. Pierre Cizeau & Marc Potters & Jean-Philippe Bouchaud, 2000. "Correlation structure of extreme stock returns," Science & Finance (CFM) working paper archive 0006034, Science & Finance, Capital Fund Management.
    3. Fabrizio Lillo & Rosario N. Mantegna, 2000. "Variety and Volatility in Financial Markets," Papers cond-mat/0006065, arXiv.org.
    4. Jean-Philippe Bouchaud & Andrew Matacz & Marc Potters, 2001. "The leverage effect in financial markets: retarded volatility and market panic," Science & Finance (CFM) working paper archive 0101120, Science & Finance, Capital Fund Management.
    5. P. Cizeau & M. Potters & J-P. Bouchaud, 2001. "Correlation structure of extreme stock returns," Quantitative Finance, Taylor & Francis Journals, vol. 1(2), pages 217-222.
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    Cited by:

    1. Christophe Schinckus & Çınla Akdere, 2015. "Towards a New Way of Teaching Statistics in Economics: The Case for Econophysics," Ekonomi-tek - International Economics Journal, Turkish Economic Association, vol. 4(3), pages 89-108, September.
    2. Boldea Bogdan Ion & Boldea Costin-Radu & Stanculescu Mircea, 2009. "An Adaptative Evolutionary Model Of Financial Investors," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 4(1), pages 897-901, May.
    3. Xiao, Di & Wang, Jun, 2012. "Modeling stock price dynamics by continuum percolation system and relevant complex systems analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(20), pages 4827-4838.
    4. Hanousek Jan & Kočenda Evžen & Novotný Jan, 2012. "The identification of price jumps," Monte Carlo Methods and Applications, De Gruyter, vol. 18(1), pages 53-77, January.
    5. Amir Safari & Detlef Seese, 2010. "Behavior of realized volatility and correlation in exchange markets," International Econometric Review (IER), Econometric Research Association, vol. 2(2), pages 73-96, September.
    6. Lin, William & Tsai, Shih-Chuan & Sun, David, 2009. "What Causes Herding:Information Cascade or Search Cost ?," MPRA Paper 20217, University Library of Munich, Germany, revised 23 Jan 2010.
    7. Lee, Sangwook & Kim, Min Jae & Lee, Sun Young & Kim, Soo Yong & Ban, Joon Hwa, 2013. "The effect of the subprime crisis on the credit risk in global scale," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(9), pages 2060-2071.
    8. Lin, William & Sun, David & Tsai, Shih-Chuan, 2010. "Searching out of Trading Noise: A Study of Intraday Transactions Cost," MPRA Paper 28937, University Library of Munich, Germany, revised 14 Jan 2011.
    9. Hokky Situngkir & Yohanes Surya, 2004. "Stylized Statistical Facts of Indonesian Financial Data: Empirical Study of Several Stock Indexes in Indonesia," Papers cond-mat/0403465, arXiv.org.
    10. Sandrine Jacob Leal, 2015. "Fundamentalists, Chartists and Asset pricing anomalies," Post-Print hal-01508002, HAL.
    11. Ausloos, Marcel & Jovanovic, Franck & Schinckus, Christophe, 2016. "On the “usual” misunderstandings between econophysics and finance: Some clarifications on modelling approaches and efficient market hypothesis," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 7-14.
    12. F. Bagarello & E. Haven, 2014. "Towards a formalization of a two traders market with information exchange," Papers 1412.8725, arXiv.org.
    13. Jovanovic, Franck & Schinckus, Christophe, 2016. "Breaking down the barriers between econophysics and financial economics," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 256-266.
    14. Ferreira, Paulo & Dionisio, Andreia, 2008. "The Entropic Analysis Of Electoral Results: The Case Of European Countries," MPRA Paper 9234, University Library of Munich, Germany.
    15. Bucsa, G. & Jovanovic, F. & Schinckus, C., 2011. "A unified model for price return distributions used in econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(20), pages 3435-3443.
    16. Fang, Wen & Wang, Jun, 2013. "Fluctuation behaviors of financial time series by a stochastic Ising system on a Sierpinski carpet lattice," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(18), pages 4055-4063.
    17. Jan Novotn?? & Jan Hanousek & Ev??en Ko??enda, 2013. "Price Jump Indicators: Stock Market Empirics During the Crisis," William Davidson Institute Working Papers Series wp1050, William Davidson Institute at the University of Michigan.
    18. Oliveira dos Santos Soares, Ricardo & Martinez, Alexandre Souto, 2006. "The geometrical patterns of cooperation evolution in the spatial prisoner's dilemma: An intra-group model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 369(2), pages 823-829.
    19. Christophe Schinckus, 2011. "What can econophysics contribute to financial economics?," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(2), pages 147-163, June.
    20. D’Amico, Guglielmo & Janssen, Jacques & Manca, Raimondo, 2009. "European and American options: The semi-Markov case," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(15), pages 3181-3194.
    21. Jovanovic, Franck & Schinckus, Christophe, 2017. "Econophysics and Financial Economics: An Emerging Dialogue," OUP Catalogue, Oxford University Press, number 9780190205034.
    22. Kostanjcar, Zvonko & Jeren, Branko & Juretic, Zeljan, 2012. "Impact of uncertainty in expected return estimation on stock price volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(22), pages 5563-5571.
    23. Sandrine Jacob Leal, 2015. "Fundamentalists, chartists and asset pricing anomalies," Quantitative Finance, Taylor & Francis Journals, vol. 15(11), pages 1837-1850, November.
    24. Bernardo Spagnolo & Davide Valenti, 2008. "Volatility Effects on the Escape Time in Financial Market Models," Papers 0810.1625, arXiv.org.
    25. Schinckus, Christophe, 2009. "Economic uncertainty and econophysics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(20), pages 4415-4423.

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