Complex Model of Market Price Development and Its Simulation

Abstract

The purpose of this study is to suggest a complex model of market price development for liquid assets, which is able to simulate all of the main features particular to the real price development and has a realistic financial explanation. First, the paper defines assumptions for the model construction from empirically observed processes. Then, the model is implemented in the real simulation environment. Finally, the ability of the model is checked to simulate empirically observed features, e.g. leptokurtic characteristics or skewness of the price distribution. Also, this paper newly defines and implements the resonance effect. FFT analysis is used to support oscillation processes. Finally, selected markets are provided with parameter optimisation of the model based on empirical observations. It was found that the model built under the previously mentioned assumptions was able to explain empirically observed effects that reversely support the correctness of those assumptions. The practical value of the constructed model can be found in many areas, including risk management and asset valuation.

Basel III Leverage and Capital Ratio over the Economic Cycle in the Czech Republic and its Comparison with the CEE Region

“…capital conservation buffer 2.5%) ≥ 8.5% of Risk Weighted Assets (RWA); minimum total capital requirement (sum of the Tier 1 and Tier 2 capital) ≥ 10.5% of RWA. The weighted median of all risk-and non-risk based ratios reveals an upward trend during the various economic cycles, newly analysed by Stádník and Miečinskienė (2015). Between the crisis period of 2007-09 and the recovery years 2010-14, the median of the risk-weighted Tier 1 capital ratio increased from 11.3% to 15.6%, while the leverage ratio in the Basel III regime increased very moderately from 5.6% to 6.8%.…”

Why Are Savings Accounts Perceived as Risky Bank Products?

“…For simplicity, we focus on market risk only in our model (for more details on market risk management see Resti and Sironi (2007) or Stádník and Miecinskiene (2015)). Obviously, credit risk is of great importance in banking as highlighted by, for instance, Dvořák (2005), Janda et al (2013), Šútorová and Teplý (2013) or Mejstřík et al (2014).…”