Related papers: Choosing the Right Return Distribution and the Exc…
This study presents empirical evidence to support the validity of new definitions in financial markets. The author develops a new method to determine investors' risk attitudes in financial markets. The risk attitudes of investors in US…
The integration and innovation of finance and technology have gradually transformed the financial system into a complex one. Analyses of the causesd of abnormal fluctuations in the financial market to extract early warning indicators…
This study provides the solution to the equity premium puzzle. The new model was developed by including the behavior of investors toward risk in financial markets in prior studies. The calculations of this newly tested model show that the…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
I show that the so-called causality paradox of time-dependent density functional theory arises from an incorrect formulation of the variational principle for the time evolution of the density. The correct formulation not only resolves the…
We consider the tail probabilities of stock returns for a general class of stochastic volatility models. In these models, the stochastic differential equation for volatility is autonomous, time-homogeneous and dependent on only a finite…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
The purpose of this work is to explore the role that random arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a…
This paper describes asset price and return disturbances as result of relations between transactions and multiple kinds of expectations. We show that disturbances of expectations can cause fluctuations of trade volume, price and return. We…
This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the…
One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…
This paper presents an approach for developing the explanation capabilities of rule-based expert systems managing imprecise and uncertain knowledge. The treatment of uncertainty takes place in the framework of possibility theory where the…
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
A range of empirical puzzles in finance has been explained as a consequence of traders being averse to ambiguity. Ambiguity averse traders can behave in financial portfolio problems in ways that cannot be rationalized as maximizing…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
With the daily and minutely data of the German DAX and Chinese indices, we investigate how the return-volatility correlation originates in financial dynamics. Based on a retarded volatility model, we may eliminate or generate the…
Predicting volatility in financial markets, including stocks, index ETFs, foreign exchange, and cryptocurrencies, remains a challenging task due to the inherent complexity and non-linear dynamics of these time series. In this study, I apply…
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
In this short note the theory for multivariate asset allocation with elliptically symmetric distributions of returns, as developed in the author's prior work, is specialized to the case of returns drawn from a multivariate Laplace…