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


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


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.

Suggested Citation

  • Li, Jiang-Cheng & Mei, Dong-Cheng, 2013. "The influences of delay time on the stability of a market model with stochastic volatility," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 392(4), pages 763-772.
  • Handle: RePEc:eee:phsmap:v:392:y:2013:i:4:p:763-772 DOI: 10.1016/j.physa.2012.10.028

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    References listed on IDEAS

    1. Luciano Andreozzi, 2004. "Rewarding Policemen Increases Crime. Another Surprising Result from the Inspection Game," Public Choice, Springer, vol. 121(1), pages 69-82, October.
    2. repec:cup:apsrev:v:84:y:1990:i:02:p:569-586_19 is not listed on IDEAS
    3. Vega-Redondo,Fernando, 2003. "Economics and the Theory of Games," Cambridge Books, Cambridge University Press, number 9780521772518, March.
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