Related papers: Entropic Dynamics of Exchange Rates and Options
Entropy is a measure of self-information which is used to quantify losses. Entropy was developed in thermodynamics, but is also used to compare probabilities based on their deviating information content. Corresponding model uncertainty is…
We study the performance of the euro/Swiss franc exchange rate in the extraordinary period from September 6, 2011 and January 15, 2015 when the Swiss National Bank enforced a minimum exchange rate of 1.20 Swiss francs per euro. Based on the…
Entropic Dynamics is a framework for deriving the laws of physics from entropic inference. In an (ED) of particles, the central assumption is that particles have definite yet unknown positions. By appealing to certain symmetries, one can…
Entropic dynamics, a program that aims at deriving the laws of physics from standard probabilistic and entropic rules for processing information, is developed further. We calculate the probability for an arbitrary path followed by a system…
The fractional Brownian motion (fBm) extends the standard Brownian motion by introducing some dependence between non-overlapping increments. Consequently, if one considers for example that log-prices follow an fBm, one can exploit the…
Graph based entropy, an index of the diversity of events in their distribution to parts of a co-occurrence graph, is proposed for detecting signs of structural changes in the data that are informative in explaining latent dynamics of…
In the Entropic Dynamics framework the dynamics is driven by maximizing entropy subject to appropriate constraints. In this work we bring Entropic Dynamics one step closer to full equivalence with quantum theory by identifying constraints…
Several phenomena are available representing market activity: volumes, number of trades, durations between trades or quotes, volatility - however measured - all share the feature to be represented as positive valued time series. When…
This letter highlights the entropy exchange phenomenon in a coupled binary inter-correlating system following Haldane's non-linear statistical correlation. A unique coupling between a classical and a quantum-like system at the marginal…
Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads…
A time-varying cointegration model for foreign exchange rates is presented. Unlike previous studies, we allow the loading matrix in the vector error correction (VEC) model to be varying over time. Because the loading matrix in the VEC model…
We develop a stochastic volatility framework for modeling multiple currencies based on CBI-time-changed L\'evy processes. The proposed framework captures the typical risk characteristics of FX markets and is coherent with the symmetries of…
In the present work, a new time-dependent exchange theory is presented wherein the symmetry constraints, on a multi-electron wavefunction, are properly accounted for. In so doing, the equations of motion, incorporating the required…
The modeling of diffusion processes on graphs is the basis for many network science and machine learning approaches. Entropic measures of network-based diffusion have recently been employed to investigate the reversibility of these…
Understanding the stochastic behavior of currency exchange rates is critical for assessing financial stability and anticipating market transitions. In this study, we investigate the empirical dynamics of the USD exchange rate in three…
When quantifying the mixing properties of a quantum dynamical system in terms of dynamical entropy, the following scheme appears natural: observe the state of the system at regular time intervals while it evolves and determine the entropy…
The paper models foreign capital inflow from the developed to the developing countries in a stochastic dynamic programming (SDP) framework. Under some regularity conditions, the existence of the solutions to the SDP problem is proved and…
Entropic aging consists in a progressive slowing down of the low-temperature dynamics of a glassy system due to the rarefaction of downwards directions on the energy landscape, as lower and lower energy levels are reached. A prototypical…
In the Entropic Dynamics (ED) approach the essence of quantum theory lies in its probabilistic nature while the Hilbert space structure plays a secondary and ultimately optional role. The dynamics of probability distributions is driven by…
The feasibility of XRP as a liquidity medium in cross-border transactions is assessed in this paper using a thorough stochastic framework. We use simulations of settlement latency, regime-switching volatility, and jump-diffusion models. The…