High-frequency Uniswap v3 crypto data show non-quadratic potentials, with double-well shapes at short sampling frequencies that the author links to market stress.
The Inverted Parabola World of Classical Quantitative Finance: Non-Equilibrium and Non-Perturbative Finance Perspective
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abstract
Classical quantitative finance models such as the Geometric Brownian Motion or its later extensions such as local or stochastic volatility models do not make sense when seen from a physics-based perspective, as they are all equivalent to a negative mass oscillator with a noise. This paper presents an alternative formulation based on insights from physics.
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Non-Linear and Meta-Stable Dynamics in Financial Markets: Evidence from High Frequency Crypto Currency Market Makers
High-frequency Uniswap v3 crypto data show non-quadratic potentials, with double-well shapes at short sampling frequencies that the author links to market stress.