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

Jiang-Cheng Li and Dong-Cheng Mei

Physica A: Statistical Mechanics and its Applications, 2013, vol. 392, issue 4, 763-772

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.

Keywords: Financial markets; Heston model; Time delay; Correlated noises; The mean escape time (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:392:y:2013:i:4:p:763-772

DOI: 10.1016/j.physa.2012.10.028

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