Related papers: Entropy and Uncertainty Analysis in Financial Mark…
We discuss the coherence properties of Expected Shortfall (ES) as a financial risk measure. This statistic arises in a natural way from the estimation of the "average of the 100p % worst losses" in a sample of returns to a portfolio. Here p…
Portfolio diversification is a cornerstone of modern finance, while risk aversion is central to decision theory; both concepts are long-standing and foundational. We investigate their connections by studying how different forms of…
Entropy regularization is known to improve exploration in sequential decision-making problems. We show that this same mechanism can also lead to nearly unbiased and lower-variance estimates of the mean reward in the optimize-and-estimate…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
In this work, we consider a recently proposed entropy S (called varentropy) defined by a variational relationship dI=beta*(d<x>-<dx>) as a measure of uncertainty of random variable x. By definition, varentropy underlies a generalized…
Various strategies for active learning have been proposed in the machine learning literature. In uncertainty sampling, which is among the most popular approaches, the active learner sequentially queries the label of those instances for…
We study large and moderate deviations for a life insurance portfolio, without assuming identically distributed losses. The crucial assumption is that losses are bounded, and that variances are bounded below. From a standard large…
In nonlinear dynamics, basins of attraction link a given set of initial conditions to its corresponding final states. This notion appears in a broad range of applications where several outcomes are possible, which is a common situation in…
This paper addresses the challenge of model uncertainty in quantitative finance, where decisions in portfolio allocation, derivative pricing, and risk management rely on estimating stochastic models from limited data. In practice, the…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
This paper provides an innovative perspective on the role of gold as a hedge and safe haven. We use a quantile-on-quantile regression approach to capture the dependence structure between gold returns and changes in uncertainty under…
Effective software safety standards will contribute to confidence, or assurance, in the safety of the systems in which the software is used. It is infeasible to demonstrate a correlation between standards and accidents, but there is an…
Uncertainty is prevalent in engineering design, data-driven problems, and decision making broadly. Due to inherent risk-averseness and ambiguity about assumptions, it is common to address uncertainty by formulating and solving conservative…
In this article we study the problem of quantifying the uncertainty in an experiment with a technical system. We propose new density estimates which combine observed data of the technical system and simulated data from an (imperfect)…
We develop an entropic framework to model the dynamics of stocks and European Options. Entropic inference is an inductive inference framework equipped with proper tools to handle situations where incomplete information is available. The…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
The traditional measurement theory interprets the variance as the dispersion of a measured value, which is actually contrary to a general mathematical concept that the variance of a constant is 0. This paper will fully demonstrate that the…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
A new entropy-like measure as well as a new measure of total uncertainty pertaining to the Dempster-Shafer theory are introduced. It is argued that these measures are better justified than any of the previously proposed candidates.
The generalized entropic measure, which is optimized by a given arbitrary distribution under the constraints on normalization of the distribution and the finite ordinary expectation value of a physical random quantity, is considered and its…