Top PDF Application of continuous-time random walk to statistical arbitrage

Application of continuous-time random walk to statistical arbitrage

Application of continuous-time random walk to statistical arbitrage

Table 1 compares the predictability of the Markovian and non-Markovian approaches of the strategy for a range of transaction costs. The first column represents the transaction cost required to take a long or short position in the spread. The optimal barrier levels for the Markovian (4) and non-Markovian (3) master equations are given in columns 3 and 5. They are identical, meaning that the profit per trade, b2 — b1 — c, is the same for both strategies. However, the trade frequency, computed as a function of the first-passage time (1) of the log- price xt, is model-dependent. It is governed by the probability density function of the asset return λ(ξ) and also depends on the waiting-time distribution ψ (τ ) for the non-Markovian approach. The probability of breaching a barrier is higher during high activity than illiquid periods. The impact of the waiting-time distribution on the model precision is particularly important for liquid trading pairs offering a very low transaction cost. When the cost c = 0.1%, the Markovian model is a poor predictor of the real profit generated by the strategy. It forecasts an expected profit of 1696% for the period considered while the actual expected profit reaches 258%. For lower frequency trading the contribution of the waiting-time distribution ψ(τ ) is limited and the non-Markovian equation underestimates the real profit.
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A ratio to evaluate harvest procedures management in an economic system where resources dynamics is ruled by an Ornstein-Uhlenbeck process

A ratio to evaluate harvest procedures management in an economic system where resources dynamics is ruled by an Ornstein-Uhlenbeck process

see [ 11 ] , is a stochastic process that, roughly speaking, describes the velocity of a massive Brownian particle under the influence of friction. It is stationary, Gaussian and Markovian, being the only nontrivial process that satisfies these three conditions, up to allowing linear transformations of the space and time variables. Over time, the process tends to drift towards its long-term mean: such a process is called mean-reverting. This process can be thought as a modification of the random walk in continuous time, or Wiener process, in which the properties of the process have been changed so that there is a tendency of the walk to move back towards a central location, with a greater attraction when the process is further away from the center. It can also be considered as the continuous-time analogue of the discrete-time AR (1) process.
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Application of time-series analysis for prediction of molding sand properties in production cycle

Application of time-series analysis for prediction of molding sand properties in production cycle

Thus obtained residual data can be used for regression model- ing. However, a question arises if these data contain important information or they are simply a random noise. In the second case the modeling would be certainly unsuccessful. To answer this question some statistical tests can be applied. One of them is the non-parametric runs-test that verifies a randomness hypothesis for a binary-valued data sequence; in case of time-series, the signs of the residual values of the time-series. Another test as- sumes, that if the residual component is of random nature then it is characterized by a low autocorrelation coefficient. In particular, the autocorrelation of the first order is tested (i.e. for time lag equal to 1), using the Durbin-Watson test. The description of the both tests can be found in [7]).
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Detecting customer defections: an application of continuous duration models

Detecting customer defections: an application of continuous duration models

A continuous survival analysis will be used to understand the residential customer churn in the FT industry (contractual settings) in Portugal. Let be a continuous non-negative random variable, which represents the survival time in days. Two key concepts in survival analysis are the survival and the hazard function. The survival function is the probability of an individual to survive beyond time and the hazard function is the instantaneous potential per unit time for the event occurrence (customer churn), given that the individual has survived up to time . Survival models can accom- modate both the proportional hazards (PH) and the accelerated failure time (AFT) forms. PH models assume that the hazard rates of any two individuals are proportional over time and that the hazard ratio is constant over time, and as such, the effect of any covariate in the hazard function is constant over time. AFT models assume that there is a constant non-negative acceleration factor that stretches out or shrinks survival times. AFT models are linear models of .
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RBRH  vol.22

RBRH vol.22

The water resources quality continuous monitoring is a complex activity. It generates extensive databases with time series of many variables and monitoring points that require the application of statistical methods for the information extraction. The application of statistical methods for frequency analysis of time series is linked to attending of the basic assumptions of randomness, homogeneity, independence, and stationarity. However, despite its importance, the veriication of these assumptions in water quality literature is unusual. Therefore, the present study tests the Upper Iguaçu basin water quality time series against the mentioned hypotheses. Rejection was observed in 15%, 26%, 51% e 31% for randomness, homogeneity, independence, and stationarity, respectively. The results evidenced the strong relation between monitoring strategy, data assessment and meeting of basic statistical assumptions for the analysis of water quality time series. Even with the existence of possible solutions for addressing those issues, the standard monitoring strategies, with irregular frequencies and lack of representativeness in relation to other periods, beyond commercial, act as an obstacle to their implementation.
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Factor analysis in the stock market: an application to statistical arbitrage

Factor analysis in the stock market: an application to statistical arbitrage

So, may approach was to divide all the 260 stocks into 13 different groups (20 assets per group), using a simply percentile division of the different factors. Moreover we must take in mind that not all groups always had 20 assets. As it has been explained early, some assets and some factors for specific stocks in specific years cannot be retrieved from Bloomberg, which may bias the results. However, since these differences were minimal, I chose to neglect that fact and used the available information to construct the different groups, ignoring the assets that do not present data for a specific period of time.
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Dry Markets and Statistical Arbitrage Bounds for European Derivatives

Dry Markets and Statistical Arbitrage Bounds for European Derivatives

We derive statistical arbitrage bounds for the buying and selling price of European derivatives under incomplete markets. In this paper, incompleteness is generated due to the fact that the market is dry, i.e., the underlying asset cannot be transacted at certain points in time. In particular, we re¯ne the notion of statistical arbitrage in order to ex- tend the procedure for the case where dryness is random, i.e., at each point in time the asset can be transacted with a given probability. We analytically characterize several properties of the statistical arbitrage- free interval, show that it is narrower than the super-replication in- terval and dominates somehow alternative intervals provided in the literature. Moreover, we show that, for su±ciently incomplete mar- kets, the statistical arbitrage interval contains the reservation price of the derivative.
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An Introduction to the Fractional Continuous- Time Linear Systems: The 21

An Introduction to the Fractional Continuous- Time Linear Systems: The 21

[20] N.A. Kolmogorov, “Wienersche Spiralen und Einige Andere Interessante Kurven im Hilbertschen Raum,” Compte Rendus de l’Académie des Sciences de 1’Union des Républiques Soviétiques Socialistes, vol. 26, no. 2, pp. 115–118, 1940. [21] T.I. Laakso, V. Välimäki, M. Kaljalainen, and U.K. Laine, “Splitting the Unit Delay,” IEEE Signal Processing Magazine, vol. 13, no. 1, pp. 30–60, Jan. 1996. [22] P. Lanusse, J. Sabatier, R. Malti, P. Melchior, X. Moreau, and A. Oustaloup, “Past and Some Recent CRONE Group Applications of Fractional Differentia- tion,” Presentation at the Symposium on Applied Fractional Calculus (SAFC07), Industrial Engineering School (University of Extremadura), pp. 15–17, Oct. 2007, Badajoz, Spain.
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On equilibrium prices in continuous time

On equilibrium prices in continuous time

We consider a stochastic pure exchange economy where a finite set I of agents live in a world of uncertainty from time 0 to time T . Uncertainty is modeled by a complete probability space (Ω, F, P). Each ω ∈ Ω is a state of nature which is a complete description of one possible realization of all exogenous sources of uncertainty from time 0 to time T . The sigma-field F is the col- lection of events which are distinguishable at time T and P is a probability measure on (Ω, F). The probability space (Ω, F, P) is endowed with a filtra- tion F = {F(t) : t ∈ [0, T ]} which represents the time evolution of the agents’ knowledge about the states of nature. We assume that F(0) is P-almost surely trivial and that F satisfies the usual conditions of right-continuity and complete- ness. A process is said optional if it is O-measurable where O is the sigma-field on Ω × [0, T ] generated by right-continuous F-adapted processes with left-limits.
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Parameter Estimation in Continuous Time Domain

Parameter Estimation in Continuous Time Domain

This paper will aim to presents the applications of a continuous-time parameter estimation method for estimating structural parameters of a real bridge structure. For the purpose of illustrating this method two case studies of a bridge pile located in a highly seismic risk area are considered, for which the structural parameters for the mass, damping and stiffness are estimated. The estimation process is followed by the validation of the analytical results and comparison with them to the measurement data. Further benefits and applications for the continuous-time parameter estimation method in civil engineering are presented in the final part of this paper.
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Efficient Market Hypothesis in European Stock Markets

Efficient Market Hypothesis in European Stock Markets

This paper reports the results of tests on the weak-form market efficiency applied to stock market indexes of France, Germany, UK, Greece, Portugal and Spain, from January 1993 to December 2007. We use a serial correlation test, a runs test, an augmented Dickey-Fuller test and the multiple variance ratio test proposed by Lo and MacKinlay (1988) for the hypothesis that the stock market index follows a random walk. The tests are performed using daily and monthly data for the whole period and for the period of the last five years, i.e., 2003 to 2007. Overall, we find convincing evidence that monthly prices and returns follow random walks in all six countries. Daily returns are not normally distributed, because they are negatively skewed and leptokurtic. France, Germany, UK and Spain meet most of the criteria for a random walk behavior with daily data, but that hypothesis is rejected for Greece and Portugal, due to serial positive correlation. However, the empirical tests show that these two countries have also been approaching a random walk behavior after 2003. (JEL G14; G15)
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An Introduction to the Fractional Continuous- Time Linear Systems: The 21

An Introduction to the Fractional Continuous- Time Linear Systems: The 21

that is a special case of the two parameter Mittag-Leffler function that is a generalization of the exponential to what it reduces when ν = 1. This function is well studied {see [1], [7], [19], [51], [54]}. An interesting implementa- tion was done by Prof. Podlubny and can be found at the site of MatLab. It is an implementation of the two param- eter generalized Mittag-Leffler function with precision control—usage: mlf(alfa, beta, z, p). Equation (11) sug- gests us to work with the step response instead of the impulse response to avoid derivatives or working with non-regular functions near the origin.
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STEGANALYSIS OF REAL TIME IMAGE BY STATISTICAL ATTACKS

STEGANALYSIS OF REAL TIME IMAGE BY STATISTICAL ATTACKS

A more general class of steganalysis techniques pioneered independently can be designed to work with any steganographic embedding algorithm, even an unknown algorithm. Such techniques have subsequently been called Universal Steganalysis techniques or Blind Steganalysis Techniques. Such techniques essentially design a classifier based on a training set of cover-objects and stego-objects arrived at from a variety of different algorithms. Classification is done based on some inherent”features” of typical natural images, which can get violated when an image undergoes some embedding process. Prediction accuracy can be interpreted as the ability of the measure to detect the presence of a hidden message with minimum error on average. The feature should be independent on the type and variety of images supplied to it[7].
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Reserves Represented by Random Walks

Reserves Represented by Random Walks

The problem of Gambler's ruin, which reserves behave according to a simple random walk, is presented in a lot of textbooks about the stochastic processes theory in relation with Markov Chains, Random Walks, Martingales and even in other contexts. Very clear approaches to this subject are Billingsley [1] and Feller [2] that solve the problem through the classic first step analysis in order to obtain a difference equation. This proceeding is followed in this work. In alternative, Grimmett and Stirzaker [3] and Karlin and Taylor [4] present also resolutions through the Martingales Theory, as an applications’ example of the Martingales Stopping Time Theorem.
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Modelos de comportamento para simulação de mobilidade em ambientes urbanos

Modelos de comportamento para simulação de mobilidade em ambientes urbanos

O The ONE (Opportunistic Network Environment) é um simulador de redes oportunísticas. O simulador está a ser desenvolvido pelos projetos SINDTN (Security Infrastructure for Delay Tolerant Network) (SINDTN 2011) e CATDTN (Connectivity, Applications, and Trials of Delay Tolerant Networking) e conta com o apoio da Nokia Research Center (Finland) (Nokia Research Center 2011). O simulador está a ser desenvolvido em Java e é um projeto open-source, estando o seu código disponível para download no site do projeto (http://www.netlab.tkk.fi/tutkimus/dtn/theone/, acedido a Outubro 2012). Ao nível da portabilidade, sendo o simulador uma aplicação em Java, o The ONE é bastante flexível uma vez que funciona sem problemas nos principais sistemas operativos da atualidade, Windows, Mac OSX e Linux. A última versão lançada do software foi a 1.4.1 e foi lançado em 31/01/2011.
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Application of Site- and Time- Heterogeneous Evolutionary Models to Mitochondrial Phylogenomics

Application of Site- and Time- Heterogeneous Evolutionary Models to Mitochondrial Phylogenomics

Strand asymmetry is usually measured by AT and GC skews, as expressed by (A-T)/(A+T) and (G-C)/(G+C), respectively (Perna and Kocher, 1995). Positive AT skew values indicate more A than T and positive GC skew values more G than C, and vice versa. Strand asymmetries can be generally stable in some taxa such as vertebrates, in which the vast majority of genes show positive AT and negative GC skews. In vertebrates, only the ND6 gene shows the opposite compositional bias because its coding polarity is the opposite from all the other protein-coding genes. However, in invertebrates, strand specific asymmetries are more variable, mainly because gene rearrangements (particularly gene inversions) are much more frequent in this group. Likewise, in invertebrates, the H-strand origins of replication also switch their orientation in many taxa (Hassanin et al., 2005; Scouras and Smith, 2006). Since the strand bias is related with the orientation of the replication process, a reverse replication mechanism will also lead to an inverse compositional bias. For example, all available mitogenomes of crinoids (Echinodermata; Scouras and Smith, 2006) and some species in Cephalochordata (Kon et al., 2007) have generalized reversed strand asymmetry, when compared with the remaining mitogenomes of the same taxonomic group (phylum or subphylum, respectively). That occurs due to an inversion of the replication origin (the control region) and consequently of the replication direction (the H-strand became the L-strand and vice versa) (Hassanin et al., 2005; Kilpert and Podsiadlowski, 2006; Fonseca et al., 2008). In conclusion, compositional heterogeneities can also result from switches in coding polarities of genes and from reversal replication process of mitochondrial genomes. If a given gene (or group of genes) is inverted in some taxa, this will contribute to increase the heterogeneity of the patterns of sequence evolution within a dataset. In these scenarios, classical homogeneous models are not expected to capture the complex sequence evolution, resulting in misleading phylogenetic relationships. On the contrary, one expects that heterogeneous models can incorporate the time- and sequence-heterogeneity of the sequences and correctly infer the phylogenetic relationships between taxa.
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Selection of the temperature of casting the bronzes to plaster moulds

Selection of the temperature of casting the bronzes to plaster moulds

dependence from the temperature of casting the bronze to the mould on Figure 6. From the introduced cross - section of casts from the probe TDAg, it results that it together with considerably grows up the depth of the contraction cavity with the growth of the temperature of casting, and what joins with this executed along its axis the volumetric contraction grows up, especially bronze B555 (Fig. 5a and 6). The bronze B10 is characterizes considerably smaller volumetric contraction (Fig. 5b and 6), however overheated 1180 °C above and cast to the hot plaster mould, in the conditions of the atmospheric pressure, it undergoes strong gassing with what considerable decrease of the depth of the contraction cavity joins (Fig. 5b 1200 ° C and Fig . 6). Zinc as high active metal in the relation of oxygen influences the lower- ing of the content of gases dissolved in the bronze B555. Consid- erably larger content Zn in the chemical composition of the bronze B555 (approx. 5%), in the comparison with the bronze B10 (to 0.5 %), it favours creation on the surface of the solidifica- tion bronze of the layer of oxides Zn and Cu, in the composition natural slags about the smaller mass density from the liquid bronze, making difficult chemical adsorption and dissolving the hydrogen and oxygen in the liquid bronze. Bronze B10 including first of all the admixture approx. 10% Sn, element of little active in the relation to oxygen, it absorbs from surroundings highly both the hydrogen as and the oxygen, what it brings in the conse- quence, together with the growth of the temperature of casting, to gassing the bronze.
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Evaluation of susceptibility of the ZRE1 alloy to hot cracking in conditions of forced strain

Evaluation of susceptibility of the ZRE1 alloy to hot cracking in conditions of forced strain

This work in combination with industrial tests of casting welding show that the causes of high-temperature brittleness are the partial tears of the structure and the hot cracks of both the castings and the welded and padded joints. Such phenomena should be treated as irreversible failures caused by the process of crystallisation that is in the area of co-existence of the solid and liquid structural constituent. The assessment of the resistance to hot fractures was conducted on the basis of the transvarestriant trial. The transvarestriant trial consists in changing of strain during welding It was stated that the range of the high-temperature brittleness is very broad, which significantly limits the application of the welding techniques to join or mend the elements made of alloy ZRE-1. The brittleness is caused mainly by metallurgical factors, i.e., precipitation of inter-metal phases from the solid solution.
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Dissertação de Mestrado Previsão do Lucro Contábil e do Fluxo de Caixa: Análise Por Meio do Modelo Random Walk

Dissertação de Mestrado Previsão do Lucro Contábil e do Fluxo de Caixa: Análise Por Meio do Modelo Random Walk

Considerando que a utilização de diferentes metodologias pode ser a razão da obtenção de diferentes conclusões entre os pesquisadores sobre a superioridade relativa do Lucro Líquido e do Fluxo de Caixa das Operações para prever os fluxos de caixa futuros, o objetivo desta pesquisa é avançar no estudo de Lustosa (2006), avaliando, mediante utilização de outra metodologia de previsão (random walk em vez de regressão linear), a eficácia da projeção ex ante de quatro medidas futuras de fluxo de caixa para um e dois anos à frente, a partir de medidas ex post do fluxo de caixa das operações, isolado e em conjunto com os accruals de curto prazo, e do lucro líquido contábil.
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Ambient. constr.  vol.17 número3

Ambient. constr. vol.17 número3

achine learning methods can be used to help design energy-efficient buildings reducing energy loads while maintaining the desired internal temperature. They work by estimating a response from a set of inputs such as building geometry, material properties, project costs, local weather conditions, as well as environmental impacts. These methods require a training phase which considers a dataset drawn from selected variables in the problem domain. This paper evaluates the performance of four machine learning methods to predict cooling and heating loads of residential buildings. The dataset consists of 768 samples with eight input variables and two output variables derived from building designs. The methods were selected based on exhaustive research with cross validation. Four statistical measures and one synthesis index were used for the performance assessment and comparison. The proposed framework resulted in accurate prediction models with optimized parameters that can potentially avoid modeling and testing various designs, helping to economize in the initial phase of the project.
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