Related papers: Energy, entropy, and arbitrage
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…
A technique from stochastic portfolio theory [Fernholz, 1998] is applied to analyse equity returns of Small, Mid and Large cap portfolios in an emerging market through periods of growth and regional crises, up to the onset of the global…
This paper introduces an approach to gas-like models, from the concept of entropy, using the money stock data of two economic agents, in this case of two countries, which carry out market actions (trading) in two theoretical scenarios: in…
We consider a fractional version of the Heston volatility model which is inspired by [16]. Within this model we treat portfolio optimization problems for power utility functions. Using a suitable representation of the fractional part,…
The Kullback-Leibler cluster entropy $\mathcal{D_{C}}[P \| Q] $ is evaluated for the empirical and model probability distributions $P$ and $Q$ of the clusters formed in the realized volatility time series of five assets (SP\&500, NASDAQ,…
We calculate the net energy per unit time exchanged between two sets of modes in a generic system governed by a three-wave kinetic equation. Our calculation is based on the property of detailed energy conservation of the triadic resonant…
We propose a proof of convergence of an adaptive method used in molecular dynamics to compute free energy profiles. Mathematically, it amounts to studying the long-time behavior of a stochastic process which satisfies a non-linear…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
Geometric arbitrage theory reformulates a generic asset model possibly allowing for arbitrage by packaging all asset and their forward dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes…
A general framework to describe a vast majority of biology-inspired systems is to model them as stochastic processes in which multiple couplings are in play at the same time. Molecular motors, chemical reaction networks, catalytic enzymes,…
In this short paper we introduce a new class of performance measures based on certainty equivalents defined via scaled utility functions. We analyse their properties, show that the corresponding portfolio optimization problem is well-posed…
The time variation of entropy, as an alternative to the variance, is proposed as a measure of the diffusion rate. It is shown that for linear and time-translationally invariant systems having a large-time limit for the density, at large…
Portfolio optimization has been an area that has attracted considerable attention from the financial research community. Designing a profitable portfolio is a challenging task involving precise forecasting of future stock returns and risks.…
With the increase of variable renewable energy sources (VRES) share in electricity systems, manystudies were developed in order to determine their optimal technological and spatial mix. Modern PortfolioTheory (MPT) has been frequently…
We investigate the profitability and risk of energy storage arbitrage in electricity markets under price uncertainty, exploring both robust and chance-constrained optimization approaches. We analyze various uncertainty representations,…
We develop a framework for stochastic portfolio theory (SPT), which incorporates modern nonlinear price impact and impact decay models. Our main result is the derivation of the celebrated master formula for additive functional generation of…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
This paper uses new and recently established methodologies to study the evolutionary dynamics of the cryptocurrency market, and compares the findings with that of the equity market. We begin by applying random matrix theory and principal…
The vision of electrolytic hydrogen as a clean energy vector prompts the emergence of hydrogen-centric companies that must simultaneously engage in electricity, hydrogen, and green certificate markets while operating complex, geographically…