The well-known Arbitrage Pricing Theory (APT) in finance relates security returns to variations of several economic factors. Previous success using Temporal Factor Analysis (TFA) to extract statistically uncorrelated factors has shredded light on the possibility of further identification of hidden driving economic factors. In this paper, we will first perform white noise test on the residuals o...

This article provides an exact Bayesian frame­ work for analyzing the arbitrage pricing the­ ory (APT). Based on the Gibbs sampler, we show how to obtain the exact posterior distributions for functions of interest in the factor modeL In particular, we propose a measure of the APT pricing deviations and obtain its exact posterior distribution. Using monthly portfolio returns grouped by industry ...

in financial distress studies selection of variable is commonly basedon the success of variables in variable sets employed in earlierbankruptcy studies, suggestions in the literature or an accompanyingdata reduction in a large set of variables. if seemingly different variablesets exhibit a strong relationship then heterogeneous variable setscapture common information. canonical correlation anal...

during the past decade, the world economic forum has published its annual reports in which the global competitiveness index is included. this paper aims to investigate the key factors for achieving an innovation-driven economy. in this paper, we used partial canonical correlation analysis (pcca) to examine the relationships between key pillars in “efficiency enhancers” and “business sophisticat...

We propose a new framework for analyzing pricing theory for incomplete markets and contingent claims, using conjugate duality and optimization theory. Various statements in the literature of the fundamental theorem of asset pricing give conditions under which an essentially arbitrage-free market is equivalent to the existence of an equivalent martingale measure, and a formula for the fair price...

In an earlier paper we introduced Lévy base correlation. In this paper we look at base expected loss at maturity both in the Gaussian copula and Lévy based models and link it to base correlation in these frameworks. We report on the existence of smile in both base correlation curves and discuss different interpolation methodologies in view of absence of arbitrage. Finally we discuss the propert...

In this paper, we present a quantum version of some portions of Mathematical Finance, including theory of arbitrage, asset pricing, and optional decomposition in financial markets based on finite dimensional quantum probability spaces. As examples, the quantum model of binomial markets is studied. We show that this quantum model ceases to pose the paradox which appears in the classical model of...