Related papers: A Flexible Stochastic Conditional Duration Model
We investigate activities that have different periods of duration. We define the profit intensity as a measure of this economic category. The profit intensity in a repeated trading has a unique property of attaining its maximum at a fixed…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…
Inference on unknown quantities in dynamical systems via observational data is essential for providing meaningful insight, furnishing accurate predictions, enabling robust control, and establishing appropriate designs for future…
This paper defines theoretical lower bounds of uncertainty of observations of macroeconomic variables that depend on statistical moments and correlations of random values and volumes of market trades. Any econometric assessments of…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
We apply the formalism of the continuous time random walk to the study of financial data. The entire distribution of prices can be obtained once two auxiliary densities are known. These are the probability densities for the pausing time…
Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
We study the limit behaviour of upper and lower bounds on expected time averages in imprecise Markov chains; a generalised type of Markov chain where the local dynamics, traditionally characterised by transition probabilities, are now…
We propose a novel distribution-free scheme to solve optimization problems where the goal is to minimize the expected value of a cost function subject to probabilistic constraints. Unlike standard sampling-based methods, our idea consists…
Inspired by applications in sports where the skill of players or teams competing against each other varies over time, we propose a probabilistic model of pairwise-comparison outcomes that can capture a wide range of time dynamics. We…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…
A minimal stochastic dynamical model of the interbank network is introduced, with linear interactions mediated by an integral of recent variations. Defining stress as the variance over the banks' states, the interaction correction to the…
The distributionally robust Markov Decision Process (MDP) approach asks for a distributionally robust policy that achieves the maximal expected total reward under the most adversarial distribution of uncertain parameters. In this paper, we…
We consider the scenario where the parameters of a probabilistic model are expected to vary over time. We construct a novel prior distribution that promotes sparsity and adapts the strength of correlation between parameters at successive…
We investigate the volatility return intervals in the NYSE and FOREX markets. We explain previous empirical findings using a model based on the interacting agent hypothesis instead of the widely-used efficient market hypothesis. We derive…
We investigate large changes, bursts, of the continuous stochastic signals, when the exponent of multiplicativity is higher than one. Earlier we have proposed a general nonlinear stochastic model which can be transformed into Bessel process…
A new definition of events of game-theoretic probability zero in continuous time is proposed and used to prove results suggesting that trading in financial markets results in the emergence of properties usually associated with randomness.…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…