Related papers: Entropic Dynamics of Stocks and European Options
An Entropic Dynamics of exchange rates is laid down to model the dynamics of foreign exchange rates, FX, and European Options on FX. The main objective is to represent an alternative framework to model dynamics. Entropic inference is an…
Entropic Dynamics is an information-based framework that seeks to derive the laws of physics as an application of the methods of entropic inference. The dynamics is derived by maximizing an entropy subject to constraints that represent the…
Entropic Dynamics is a framework in which dynamical laws are derived as an application of entropic methods of inference. No underlying action principle is postulated. Instead, the dynamics is driven by entropy subject to the constraints…
Grasping the historical volatility of stock market indices and accurately estimating are two of the major focuses of those involved in the financial securities industry and derivative instruments pricing. This paper presents the results of…
Entropic Dynamics is a framework in which dynamical laws such as those that arise in physics are derived as an application of entropic methods of inference. No underlying action principle is postulated. Instead, the dynamics is driven by…
Entropic dynamics is a framework in which the laws of dynamics are derived as an application of entropic methods of inference. Its successes include the derivation of quantum mechanics and quantum field theory from probabilistic principles.…
The principle of absence of arbitrage opportunities allows obtaining the distribution of stock price fluctuations by maximizing its information entropy. This leads to a physical description of the underlying dynamics as a random walk…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
This article introduces an intrinsic entropy model that can be used as an indicator to gauge investor interest in a given exchange-traded security, along with the state of the general market corroborated by individual security trade data.…
Entropic Dynamics is a framework in which quantum theory is derived as an application of entropic methods of inference. There is no underlying action principle. Instead, the dynamics is driven by entropy subject to the appropriate…
The increasing richness in volume, and especially types of data in the financial domain provides unprecedented opportunities to understand the stock market more comprehensively and makes the price prediction more accurate than before.…
Entropic dynamics is a framework for defining dynamical systems that is aligned with the principles of information theory. In an entropic dynamics model for motion on a statistical manifold, we find that the rate of changes for expected…
Modern approaches to stock pricing in quantitative finance are typically founded on the 'Black-Scholes model' and the underlying 'random walk hypothesis'. Empirical data indicate that this hypothesis works well in stable situations but, in…
We consider the problem of valuing a European option written on an asset whose dynamics are described by an exponential L\'evy-type model. In our framework, both the volatility and jump-intensity are allowed to vary stochastically in time…
In the paper written by Klibanov et al, it proposes a novel method to calculate implied volatility of a European stock options as a solution to ill-posed inverse problem for the Black-Scholes equation. In addition, it proposes a trading…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
We introduce a model for the dynamics of stock prices based on a non quadratic path integral. The model is a generalization of Ilinski's path integral model, more precisely we choose a different action, which can be tuned to different time…
Entropic Dynamics (ED) is a framework in which Quantum Mechanics is derived as an application of entropic methods of inference. In ED the dynamics of the probability distribution is driven by entropy subject to constraints that are codified…
The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the affine models, we define a new specification for the…
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…