Related papers: Absolute Return Volatility
Extreme values and the tail behavior of probability distributions are essential for quantifying and mitigating risk in complex systems of all kinds. In multivariate settings, accounting for correlations is crucial. Although extreme value…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
We revisit the classical Merton consumption--investment problem when risky-asset returns are modeled by stochastic differential equations interpreted through a general $\alpha$-integral, interpolating between It\^{o}, Stratonovich, and…
A crucial goal of quantum information is to find new ways to exploit the properties of quantum devices as resources. One of the prominent properties of quantum devices of particular interest is their negativity in quasi-probability…
A continuous-time consumption-investment model with constraint is considered for a small investor whose decisions are the consumption rate and the allocation of wealth to a risk-free and a risky asset with logarithmic Brownian motion…
We study, both analytically and numerically, an ARCH-like, multiscale model of volatility, which assumes that the volatility is governed by the observed past price changes on different time scales. With a power-law distribution of time…
In this paper, we propose a general bi-objective model for portfolio selection, aiming to maximize both a diversification measure and the portfolio expected return. Within this general framework, we focus on maximizing a diversification…
Most people are risk-averse (risk-seeking) when they expect to gain (lose). Based on a generalization of ``expected utility theory'' which takes this into account, we introduce an automaton mimicking the dynamics of economic operations.…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
The price of electricity is far more volatile than that of other commodities normally noted for extreme volatility. The possibility of extreme price movements increases the risk of trading in electricity markets. However, underlying the…
We discuss the probabilistic properties of the variation based third and fourth moments of financial returns as estimators of the actual moments of the return distributions. The moment variations are defined under non-parametric assumptions…
The percolation model of stock market speculation allows an asymmetry (in the return distribution) leading to fast downward crashes and slow upward recovery. We see more small upturns and more intermediate downturns.
We generalize nonequilibrium integral equalities to situations involving absolutely irreversible processes for which the forward-path probability vanishes and the entropy production diverges, rendering conventional integral fluctuation…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
Dealing with quadratic payments, marginal probability is usually considered ideally constant, maybe for the sake of initial simplicity. Considering the voting scenario depicted in "Quadratic Payments: A Primer" by Vitalik Buterin, firstly…
Monotonicity and recursivity are central assumptions in intertemporal consumption problems under ambiguity. We show that monotone recursive preferences admit both a recursive and an ex-ante representation, and that the certainty equivalent…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
By decomposing asset returns into potential maximum gain (PMG) and potential maximum loss (PML) with price extremes, this study empirically investigated the relationships between PMG and PML. We found significant asymmetry between PMG and…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…