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A numerical agent-based spin model of financial markets, based on the Potts model from statistical mechanics, with a novel interpretation of the spin variable (as regards financial-market models) is presented. In this model, a value of the…
We study the problem of explaining observations about the probabilities of events, such as "it rains $20\%$ of the time", "rain and snow are equally likely", etc. We explain these statements with a probability distribution or a statement…
In this paper, we develop a computational approach for estimating the mean value of a quantity in the presence of uncertainty. We demonstrate that, under some mild assumptions, the upper and lower bounds of the mean value are efficiently…
This paper studies the income fluctuation problem with capital income risk (i.e., dispersion in the rate of return to wealth). Wealth returns and labor earnings are allowed to be serially correlated and mutually dependent. Rewards can be…
A statistical, data-driven method is presented that quantifies influences between variables of a dynamical system. The method is based on finding a suitable representation of points by fuzzy affiliations with respect to landmark points…
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…
Fuzzy quantification is a subtopic of fuzzy logic which deals with the modelling of the quantified expressions we can find in natural language. Fuzzy quantifiers have been successfully applied in several fields like fuzzy, control, fuzzy…
We propose a randomised version of the Heston model-a widely used stochastic volatility model in mathematical finance-assuming that the starting point of the variance process is a random variable. In such a system, we study the small-and…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
This article is meant to give a lucid and widely accessible, self-contained account of a novel way of performing arithmetic operations on fuzzy intervals. Based on two formulae of generalized inversion (the first in close analogy to the…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
The class of radial fuzzy systems is introduced. The fuzzy systems in this class use radial functions to implement membership functions of fuzzy sets and exhibit a shape preservation property in antecedents of their rules. The property is…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
Rate change calculations in the literature involve deterministic methods that measure the change in premium for a given policy. The definition of rate change as a statistical parameter is proposed to address the stochastic nature of the…
Preferential equality is an equivalence relation on fuzzy subsets of finite sets and is a generalization of classical equality of subsets. In this paper we introduce a tightened version of the preferential equality on fuzzy subsets and…
Fuzzy logic is an alternate approach for quantifying uncertainty relating to activity duration. The fuzzy version of the backward recursion has been shown to produce results that incorrectly amplify the level of uncertainty. However, the…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
Modern portfolio theory(MPT) addresses the problem of determining the optimum allocation of investment resources among a set of candidate assets. In the original mean-variance approach of Markowitz, volatility is taken as a proxy for risk,…
Cross-sectional dispersion in firm-level realized skewness is significantly and negatively related to future stock market returns. The predictive power of skewness dispersion is robust to in-sample and out-of-sample estimation and is…
We study the concept of financial bubble in a market model endowed with a set of probability measures, typically mutually singular to each other. In this setting we introduce the notions of robust bubble and robust fundamental value in a…