Related papers: Kriging Scenario For Capital Markets
Applied to the master equation, the usual numerical integration methods, such as Runge-Kutta, become inefficient when the rates associated with various transitions differ by several orders of magnitude. We introduce an integration scheme…
Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the…
Here I will present an introduction to the results that have been recently obtained in constraint optimization of random problems using statistical mechanics techniques. After presenting the general results, in order to simplify the…
In this dissertation two simple models of stock exchange are developed and simulated numerically. The first is characterized by centralized trading with a market maker. Unfortunately, this model is unable to generate realistic market…
Betting markets are gaining in popularity. Mean beliefs generally differ from prices in prediction markets. Logarithmic utility is employed to study the risk and return adjustments to prices. Some consequences are described. A modified…
We introduce a few of the key ideas of statistical analysis using two real-world examples to illustrate how these ideas are used in practice.
We give a new predictive mathematical model for macroeconomics, which deals specifically with asset prices and earnings fluctuations, in the presence of a dynamic economy involving mergers, acquisitions, and hostile takeovers. Consider a…
Historically, the banking multiplier has been in a range of 4 to 100, with 25% to 1% reserve ratios at most layers of the banking system encompassing the majority of its range in recent centuries. Here it is shown that multipliers over 1…
We suggest that the framework of quantum information theory, which has been developing rapidly in recent years due to intense activity in quantum computation and quantum communication, is a reasonable starting point to study non-equilibrium…
A theoretical approach for characterising the influence of asymmetry of noise distribution on the escape rate of a multi-stable system is presented. This was carried out via the estimation of an action, which is defined as an exponential…
We present here two examples of stochastic modelings of social phenomena. The first topic is pedestrian counter flow. Two groups of model pedestrians move in opposite directions and create congestions. It will be shown that this congestion…
This article is a tutorial on Markov chain Monte Carlo simulations and their statistical analysis. The theoretical concepts are illustrated through many numerical assignments from the author's book on the subject. Computer code (in Fortran)…
We present an interacting-agent model of speculative activity explaining bubbles and crashes in stock markets. We describe stock markets through an infinite-range Ising model to formulate the tendency of traders getting influenced by the…
In this work, we present a numerical method based on a sparse grid approximation to compute the loss distribution of the balance sheet of a financial or an insurance company. We first describe, in a stylised way, the assets and liabilities…
For a paradigmatic case, the standard map, we discuss how the statistical description of the approach to equilibrium is related to the sensitivity to the initial conditions of the system. Using a numerical analysis we present an anomalous…
In a first part the scope of classical thermodynamics and statistical mechanics is discussed in the broader context of formal dynamical systems, including computer programmes. In this context classical thermodynamics appears as a particular…
We propose the use of statistical emulators for the purpose of valuing mortality-linked contracts in stochastic mortality models. Such models typically require (nested) evaluation of expected values of nonlinear functionals of…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
The application of the Cauchy distribution has often been discussed as a potential model of the financial markets. In particular the way in which single extreme, or "Black Swan", events can impact long term historical moments, is often…