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We propose new measures of both risk and anticipated return that incorporate the effects of skewness and heavy tails from a financial return’s probability distribution. Our cosine-based analysis, which involves maximizing the marginal Shannon information associated with the Fourier transform...
Persistent link: https://www.econbiz.de/10004981465
Ann-dimensional random vector is said to have an[alpha]-symmetric distribution,[alpha]0, if its characteristic function is of the form[phi]((u1[alpha]+...+un[alpha])1/[alpha]). We study the classes[Phi]n([alpha]) of all admissible functions[phi]: [0, [infinity])--. It is known that members...
Persistent link: https://www.econbiz.de/10005006394
A random variable is difference-form decomposable (DFD) if it may be written as the difference of two i.i.d. random terms. We show that densities of such variables exhibit a remarkable degree of structure. Specifically, a DFD density can be neither approximately uniform, nor quasiconvex, nor...
Persistent link: https://www.econbiz.de/10014278201
This article describes the basic elements of the cooperative approach to game theory, one of the two counterparts of the discipline. After the presentation of some basic definitions, the focus will be on the core and the Shapley value, two of the most central solution concepts in cooperative...
Persistent link: https://www.econbiz.de/10010318970
We propose simple sequential calibration for an asset price model driven by piecewise Lévy processes, for which simulation methods and Greeks formulas are available. The proposed methods are easy to implement and consist of fitting a sequence of Lévy processes to a return series such that they...
Persistent link: https://www.econbiz.de/10009474908
The characteristic functions of many affine jump-diffusion models, such as Heston’s stochastic volatility model and all of its extensions, involve multivalued functions such as the complex logarithm. If we restrict the logarithm to its principal branch, as is done in most software packages,...
Persistent link: https://www.econbiz.de/10010325214
At the time of writing this article, Fourier inversion is the computational method of choice for a fast and accurate calculation of plain vanilla option prices in models with an analytically available characteristic function. Shifting the contour of integration along the complex plane allows for...
Persistent link: https://www.econbiz.de/10010325539
We investigate long and short memory in α-stable moving averages and max-stable processes with α-Fréchet marginal distributions. As these processes are heavy-tailed, we rely on the notion of long range dependence based on the covariance of indicators of excursion sets. Sufficient conditions...
Persistent link: https://www.econbiz.de/10012428900
The Weibull distribution is used to describe various observed failures of phenomena and widely used in survival analysis and reliability theory. Sometimes it is very difficult to compute moments of such distributions due to various reasons for e.g. analytical issues, multi parameter cases etc....
Persistent link: https://www.econbiz.de/10012600224
This paper considers new measures of mutual dependence between multiple multivariate random processes representing multidimensional functional data. In the case of two processes, the extension of functional distance correlation is used by selecting appropriate weight function in the weighted...
Persistent link: https://www.econbiz.de/10012600256