Sample covariance is known to be a poor estimate when the data are scarce compared with the dimension. To reduce the estimation error, various structures are usually imposed on the covariance such as low-rank plus diagonal (factor models), banded models and sparse inverse covariances. We...

This paper proposes a profit model for spread trading by focusing on the stochastic movement of the price spread and its first hitting time probability density. The model is general in that it can be used for any financial instrument. The advantage of the model is that the profit from the trades...

In this paper, we construct the new class of tempered infinitely divisible (TID) distributions. Taking into account the tempered stable distribution class, as introduced by in the seminal work of Rosinsky , a modification of the tempering function allows one to obtain suitable properties. In...