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Large-scale parallel simulation and modeling have changed our world. Today, supercomputers are not just for research and scientific exploration; they have become an integral part of many industries, among which finance is one of the strongest growth factors for supercomputers, driven by ever increasing data volumes, greater data complexity and significantly more challenging data analysis. In this...
Risk measurement is an important prerequisite in modern finance. This paper aims to measure exchange rate risk of Chinese exchange market. We firstly examine the heteroscedasticity of the return series of USD/CNY and EUR/CNY data, the results suggest that there is obvious heteroscedasticity. Secondly, we choose the best GARCH model to filter the return series to i.i.d residual series and employ extreme...
In this paper, we construct an integrated index for open-ended funds to describe the total return of Chinese fund market. By using multivariate GARCH model, we study the volatility relationship between the stock open-ended fund and bond open-ended fund of China. The results show that there is the volatility persistence between the index of stock open-ended funds and the integrated stock index in Chinese...
In a Bayesian approach, we compare the volatility forecasting ability of ARCH, GARCH and stochastic volatility(SV) models, using daily Tehran stock market exchange data(TSE). To estimate the parameters of the models, Markov chain Monte Carlo(MCMC) methods is applied. The results show that the SV models perform better than the ARCH and GARCH family.
Approaches of both theoretical analysis and computer simulation are used to study a stochastic multi-agent stock market model. Theoretical analysis provides the parameter settings for different dynamic regimes including fundamental equilibrium, non-fundamental equilibrium, periodicity and chaos. Agent-based computer simulations with those settings are performed to produce the price series. Statistical...
In this paper, we propose a multi objective stochastic model with linear partial information on probability distribution (MSPLI) for portfolio selection problem. We apply an extended chance constrained compromise programming approach to obtain the deterministic equivalent of the MSPLI model.
The financial market with Knightian uncertainty is studied. Applying the important theories of backward stochastic differential equation and the method of time-risk discount, the dynamic robust pricing model of reload stock option has been studied. The explicit solution of the model has been given. At last, the article takes the stock of Sinopec as example to perform numerical analysis. The paper...
This paper studies Merton's portfolio problem for an investor who can trade a risk-free asset and a stock. We consider the case where the stock price follows a constant elasticity of variance (CEV) dynamics. By applying stochastic optimal control theory and variable change technique, we derive an explicit solution for the CRRA utility function. The solution consists of a moving Merton strategy and...
We develop an analytic warrant pricing model with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated. This is accomplished by assuming that the underlying noise in the system is derived by an Ornstein-Uhlenbeck process, rather than from a Wiener process. This model provides a valuable insight into dependence of warrant price on the return autocorrelation...
This paper presents method for split-step backward Euler scheme in regime-switching models. We generalize the classical Black-Scholes model to encompass regime-switching properties. The Black-Scholes model is shown to generate significant pricing errors when a regime-switching process governs underlying asset returns. In addition, regime-switching option values are shown to generate implied volatility...
Owing to the fluctuations in the financial markets from time to time, some input variables such as the interest rate, spot exchange rate and volatility in the Garman-Kohlhagen model can not be expected in a precise sense. Therefore, it is nature to start from the fuzzy environments of currency options markets. In this paper, we introduce fuzzy techniques and obtain the fuzzy versions of the Garman-Kohlhagen...
Taking the daily data for aluminum futures prices from 2003 to 2007 as sample, this article examines the factors of fluctuations for aluminum futures prices in China and studies the effects of these factors on futures price curve. First, this article presents the improving method on the base of predecessor research. Next, by the daily data for aluminum futures price contracts traded at the Shanghai...
In this paper, we investigate the statistical properties of fluctuations of Chinese stock index. According to the theory of artificial neural network, a stochastic time effective function is introduced in the forecasting model of the index in the present paper, which gives an improved neural network - the stochastic time effective neural network model. In this model, a promising data mining technique...
The stochastic volatility is a universal phenomenon in financial time series, and an important issue in risk management research. In this paper, through the statistical structure of the standard stochastic volatility model, we infer the SV model's likelihood function, design the parameters' conjugate prior distribution, obtain the corresponding model parameter according to the Bayesian theorem, and...
In this paper, we consider the contingent claim pricing and hedging of European call option. The theory of stock trading volume is applied to describe and study the fluctuations of stock prices in a stock market, and we obtain the formula for pricing a European call option. Then we discuss the range of parameters of the formula in a risk-averse market, and give the corresponding option pricing bounds...
Recently feedback mechanism in finance has attracted significant attention from the academic researchers and market practitioners. Within the framework of stochastic volatility model (SVM), a kind of novel stochastic volatility stock pricing model with feedback (SVSPM-F) for Chinese stock market is constructed by taking into account the notable feedbacks effect on stock price. These intricate feedbacks...
Parametric and nonparametric methods are used in estimating stochastic diffusion process. Nonparametric method has its own advantages; this paper utilizes nonparametric method to estimate drift and diffusion term. Two nonparametric methods have been studied, which are kernel estimation and local linear estimation. Local linear estimation has been used in estimating dynamics of Shanghai Stock Exchange...
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