Probability metrics with applications in finance
نویسندگان
چکیده
In the paper, we consider the application of the theory of probability metrics in several areas in the field of finance. First, we argue that specially structured probability metrics can be used to quantify stochastic dominance relations. Second, the methods of the theory of probability metrics can be used to arrive at a general axiomatic treatment of dispersion measures and probability metrics can be used to describe continuity of risk measures. Finally, the methods of probability metrics theory are applied to the benchmark-tracking problem significantly extending the problem setting.
منابع مشابه
Behavioral Finance Models and Behavioral Biases in Stock Price Forecasting
Stock market is affected by news and information. If the stock market is not efficient, the reaction of stock price to news and information will place the stock market in overreaction and under-reaction states. Many models have been already presented by using different tools and techniques to forecast the stock market behavior. In this study, the reaction of stock price in the stock market was ...
متن کاملRelative deviation metrics with applications in finance
In the paper, we generalize the classic benchmark tracking problem by introducing the class of relative deviation metrics (r.d. metrics). We consider specific families of r.d. metrics and how they interact with one another. Our approach towards their classification is inspired by the theory of probability metrics — we distinguish between compound, primary and simple r.d. metrics and introduce m...
متن کاملProbability metrics applied to problems in portfolio theory
In the paper, we consider the application of the theory of probability metrics in several areas in the field of finance. First, we argue that specially structured probability metrics can be used to quantify stochastic dominance relations. Second, the methods of the theory of probability metrics can be used to arrive at a general axiomatic treatment of dispersion measures and probability metrics...
متن کاملAnalyzing PETs on Imbalanced Datasets When Training and Testing Class Distributions Differ
Many machine learning applications like finance, medicine, and risk management suffer from class imbalance: cases of interest occur rarely. Further complicating these applications is that the training and testing samples might differ significantly in their respective class distributions. Sampling has been shown to be a strong solution to imbalance and additionally offers a rich parameter space ...
متن کاملProbability and Statistics with Applications in Finance and Economics
Probability and statistics play a vital role in every field of human activity. In particular, they are quantitative tools widely used in the areas of economics and finance. Knowledge of modern probability and statistics is essential for the development of economic and finance theories and for the testing of their validity through robust analysis of real-world data. For example, probability and ...
متن کامل