Related papers: Entropy-Based Financial Asset Pricing
Entropy estimation is a fundamental problem in information theory that has applications in various fields, including physics, biology, and computer science. Estimating the entropy of discrete sequences can be challenging due to limited data…
Entropy notions for $\varepsilon$-incremental practical stability and incremental stability of deterministic nonlinear systems under disturbances are introduced. The entropy notions are constructed via a set of points in state space which…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
We propose a new way to measure the balance between freedom and coherence in a dynamical system and a new measure of its internal variability. Based on the concept of entropy and ideas from neuroscience and information theory, we define…
Asynchronous trading in high-frequency financial markets introduces significant biases into econometric analysis, distorting risk estimates and leading to suboptimal portfolio decisions. Existing synchronization methods, such as the…
Shannon Entropy is the preeminent tool for measuring the level of uncertainty (and conversely, information content) in a random variable. In the field of communications, entropy can be used to express the information content of given…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
Electric signals have been recently recorded at the Earth's surface with amplitudes appreciably larger than those hitherto reported. Their entropy in natural time is smaller than that, $S_u$, of a ``uniform'' distribution. The same holds…
Entropy measures quantify the amount of information and correlation present in a quantum system. In practice, when the quantum state is unknown and only copies thereof are available, one must resort to the estimation of such entropy…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
In recent years there has been a closer interrelationship between several scientific areas trying to obtain a more realistic and rich explanation of the natural and social phenomena. Among these it should be emphasized the increasing…
Existing training criteria in automatic speech recognition(ASR) permit the model to freely explore more than one time alignments between the feature and label sequences. In this paper, we use entropy to measure a model's uncertainty, i.e.…
We study the recurrence to mistake dynamical balls, that is, dynamical balls that admit some errors and whose proportion of errors decrease tends to zero with the length of the dynamical ball. We prove, under mild assumptions, that the…
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…
The paper proposes a new message passing algorithm for cycle-free factor graphs. The proposed "entropy message passing" (EMP) algorithm may be viewed as sum-product message passing over the entropy semiring, which has previously appeared in…
The concept of entropy is not uniquely relevant to the statistical mechanics but among others it can play pivotal role in the analysis of a time series, particularly the stock market data. In this area sudden events are especially…
For deterministic continuous time nonlinear control systems, epsilon-practical stabilization entropy and practical stabilization entropy are introduced. Here the rate of attraction is specified by a KL-function. Upper and lower bounds for…
In recent years, it has become apparent that an isolated microprudential approach to capital adequacy requirements of individual institutions is insufficient. It can increase the homogeneity of the financial system and ultimately the cost…
Maximum entropy method for analytic continuation is extended by introducing quantum relative entropy. This new method is formulated in terms of matrix-valued functions and therefore invariant under arbitrary unitary transformation of input…
Entropy serves as a central observable which indicates uncertainty in many chemical, thermodynamical, biological and ecological systems, and the principle of the maximum entropy (MaxEnt) is widely supported in natural science. Recently,…