Related papers: Market Implied Probability Distributions and Bayes…
Realization of uncertainty of prices is captured by volatility, that is the tendency of prices to vary along a period of time. This is generally measured as standard deviation of daily returns. In this paper we propose and investigate the…
Along with the advance of opinion mining techniques, public mood has been found to be a key element for stock market prediction. However, how market participants' behavior is affected by public mood has been rarely discussed. Consequently,…
In Bayesian theory, calculating a posterior probability distribution is highly important but usually difficult. Therefore, some methods have been put forward to deal with such problem, among which, the most popular one is the asymptotic…
Using available data from the New York stock market (NYSM) we test four different bi-parametric models to fit the correspondent volume-price distributions at each $10$-minute lag: the Gamma distribution, the inverse Gamma distribution, the…
We introduce a flexible method to simultaneously infer both the drift and volatility functions of a discretely observed scalar diffusion. We introduce spline bases to represent these functions and develop a Markov chain Monte Carlo…
We propose coalescent mechanism of economic grow because of redistribution of external resources. It leads to Zipf distribution of firms over their sizes, turning to stretched exponent because of size-dependent effects, and predicts…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
Astronomers are often confronted with funky populations and distributions of objects: brighter objects are more likely to be detected; targets are selected based on colour cuts; imperfect classification yields impure samples. Failing to…
Bayesian estimation is increasingly popular for performing model based inference to support policymaking. These data are often collected from surveys under informative sampling designs where subject inclusion probabilities are designed to…
We present a theory of option pricing and hedging, designed to address non-perfect arbitrage, market friction and the presence of `fat' tails. An implied volatility `smile' is predicted. We give precise estimates of the residual risk…
The implied volatility skew has received relatively little attention in the literature on short-term asymptotics for financial models with jumps, despite its importance in model selection and calibration. We rectify this by providing…
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…
Our derivation of the distribution function for future returns is based on the risk neutral approach which gives a functional dependence for the European call (put) option price, C(K), given the strike price, K, and the distribution…
We propose a mathematical model for the word-of-mouth communications among stock investors through social networks and explore how the changes of the investors' social networks influence the stock price dynamics and vice versa. An investor…
A simple Bayesian approach to nonparametric regression is described using fuzzy sets and membership functions. Membership functions are interpreted as likelihood functions for the unknown regression function, so that with the help of a…
It is well known that the probability distribution of high-frequency financial returns is characterized by a leptokurtic, heavy-tailed shape. This behavior undermines the typical assumption of Gaussian log-returns behind the standard…
The continuous observation of the financial markets has identified some stylized facts which challenge the conventional assumptions, promoting the born of new approaches. On the one hand, the long-range dependence has been faced replacing…
This paper continues a series of studies devoted to analysis of the bivariate probability distribution P(x,y) of two consecutive price increments x (push) and y (response) at intraday timescales for a group of stocks. Besides the asymmetry…
Social and economic studies are often implemented as complex survey designs. For example, multistage, unequal probability sampling designs utilized by federal statistical agencies are typically constructed to maximize the efficiency of the…
The future value of a security is described as a random variable. Distribution of this random variable is the formal image of risk uncertainty. On the other side, any present value is defined as a value equivalent to the given future value.…