Microscopic origin of non-Gaussian distributions of financial returns

In this paper we study the possible microscopic origin of heavy-tailed probability density distributions for the price variation of financial instruments. We extend the standard log-normal process to include another random component in the so-called stochastic volatility models. We study these models under an assumption, akin to the Born-Oppenheimer approximation, in which the volatility has already relaxed to its equilibrium distribution and acts as a background to the evolution of the price process. In this approximation, we show that all models of stochastic volatility should exhibit a scaling relation in the time lag of zero-drift modified log-returns. We verify that the Dow-Jones Industrial Average index indeed follows this scaling. We then focus on two popular stochastic volatility models, the Heston and Hull-White models. In particular, we show that in the Hull-White model the resulting probability distribution of log-returns in this approximation corresponds to the Tsallis (t-Student) distribution. The Tsallis parameters are given in terms of the microscopic stochastic volatility model. Finally, we show that the log-returns for 30 years Dow Jones index data is well fitted by a Tsallis distribution, obtaining the relevant parameters. (c) 2007 Elsevier B.V. All rights reserved.

Microscopic origin of non-Gaussian distributions of financial returns

In this paper we study the possible microscopic origin of heavy-tailed probability density distributions for the price variation of financial instruments. We extend the standard log-normal process to include another random component in the so-called stochastic volatility models. We study these models under an assumption, akin to the Born-Oppenheimer approximation, in which the volatility has already relaxed to its equilibrium distribution and acts as a background to the evolution of the price process. In this approximation, we show that all models of stochastic volatility should exhibit a scaling relation in the time lag of zero-drift modified log-returns. We verify that the Dow-Jones Industrial Average index indeed follows this scaling. We then focus on two popular stochastic volatility models, the Heston and Hull-White models. In particular, we show that in the Hull-White model the resulting probability distribution of log-returns in this approximation corresponds to the Tsallis (t-Student) distribution. The Tsallis parameters are given in terms of the microscopic stochastic volatility model. Finally, we show that the log-returns for 30 years Dow Jones index data is well fitted by a Tsallis distribution, obtaining the relevant parameters. (c) 2007 Elsevier B.V. All rights reserved.

Statistical analysis and optimal classification of blood cell populations using Gaussian distributions

This dissertation develops a new figure of merit to measure the similarity (or dissimilarity) of Gaussian distributions through a novel concept that relates the Fisher distance to the percentage of data overlap. The derivations are expanded to provide a generalized mathematical platform for determining an optimal separating boundary of Gaussian distributions in multiple dimensions. Real-world data used for implementation and in carrying out feasibility studies were provided by Beckman-Coulter. It is noted that although the data used is flow cytometric in nature, the mathematics are general in their derivation to include other types of data as long as their statistical behavior approximate Gaussian distributions. ^ Because this new figure of merit is heavily based on the statistical nature of the data, a new filtering technique is introduced to accommodate for the accumulation process involved with histogram data. When data is accumulated into a frequency histogram, the data is inherently smoothed in a linear fashion, since an averaging effect is taking place as the histogram is generated. This new filtering scheme addresses data that is accumulated in the uneven resolution of the channels of the frequency histogram. ^ The qualitative interpretation of flow cytometric data is currently a time consuming and imprecise method for evaluating histogram data. This method offers a broader spectrum of capabilities in the analysis of histograms, since the figure of merit derived in this dissertation integrates within its mathematics both a measure of similarity and the percentage of overlap between the distributions under analysis. ^

Mean anisotropy of homogeneous Gaussian random fields and anisotropic norms of linear translation-invariant operators on multidimensional integer lattices

Sensitivity of output of a linear operator to its input can be quantified in various ways. In Control Theory, the input is usually interpreted as disturbance and the output is to be minimized in some sense. In stochastic worst-case design settings, the disturbance is considered random with imprecisely known probability distribution. The prior set of probability measures can be chosen so as to quantify how far the disturbance deviates from the white-noise hypothesis of Linear Quadratic Gaussian control. Such deviation can be measured by the minimal Kullback-Leibler informational divergence from the Gaussian distributions with zero mean and scalar covariance matrices. The resulting anisotropy functional is defined for finite power random vectors. Originally, anisotropy was introduced for directionally generic random vectors as the relative entropy of the normalized vector with respect to the uniform distribution on the unit sphere. The associated a-anisotropic norm of a matrix is then its maximum root mean square or average energy gain with respect to finite power or directionally generic inputs whose anisotropy is bounded above by a≥0. We give a systematic comparison of the anisotropy functionals and the associated norms. These are considered for unboundedly growing fragments of homogeneous Gaussian random fields on multidimensional integer lattice to yield mean anisotropy. Correspondingly, the anisotropic norms of finite matrices are extended to bounded linear translation invariant operators over such fields.

A new family of generalized distributions

Kumaraswamy [Generalized probability density-function for double-bounded random-processes, J. Hydrol. 462 (1980), pp. 79-88] introduced a distribution for double-bounded random processes with hydrological applications. For the first time, based on this distribution, we describe a new family of generalized distributions (denoted with the prefix `Kw`) to extend the normal, Weibull, gamma, Gumbel, inverse Gaussian distributions, among several well-known distributions. Some special distributions in the new family such as the Kw-normal, Kw-Weibull, Kw-gamma, Kw-Gumbel and Kw-inverse Gaussian distribution are discussed. We express the ordinary moments of any Kw generalized distribution as linear functions of probability weighted moments (PWMs) of the parent distribution. We also obtain the ordinary moments of order statistics as functions of PWMs of the baseline distribution. We use the method of maximum likelihood to fit the distributions in the new class and illustrate the potentiality of the new model with an application to real data.

On low-dimensional projections of high-dimensional distributions

Let P be a probability distribution on q -dimensional space. The so-called Diaconis-Freedman effect means that for a fixed dimension d<Gaussian distributions. The present paper provides necessary and sufficient conditions for this phenomenon in a suitable asymptotic framework with increasing dimension q . It turns out, that the conditions formulated by Diaconis and Freedman (1984) are not only sufficient but necessary as well. Moreover, letting P ^ be the empirical distribution of n independent random vectors with distribution P , we investigate the behavior of the empirical process n √ (P ^ −P) under random projections, conditional on P ^ .

Optimal cloning for finite distributions of coherent states

We derive optimal cloning limits for finite Gaussian distributions of coherent states and describe techniques for achieving them. We discuss the relation of these limits to state estimation and the no-cloning limit in teleportation. A qualitatively different cloning limit is derived for a single-quadrature Gaussian quantum cloner.

Bayesian invariant measurements of generalisation for continuous distributions

A family of measurements of generalisation is proposed for estimators of continuous distributions. In particular, they apply to neural network learning rules associated with continuous neural networks. The optimal estimators (learning rules) in this sense are Bayesian decision methods with information divergence as loss function. The Bayesian framework guarantees internal coherence of such measurements, while the information geometric loss function guarantees invariance. The theoretical solution for the optimal estimator is derived by a variational method. It is applied to the family of Gaussian distributions and the implications are discussed. This is one in a series of technical reports on this topic; it generalises the results of ¸iteZhu95:prob.discrete to continuous distributions and serve as a concrete example of a larger picture ¸iteZhu95:generalisation.

Non-Gaussian distribution of collective operators in quantum spin chains

We numerically analyse the behavior of the full distribution of collective observables in quantum spin chains. While most of previous studies of quantum critical phenomena are limited to the first moments, here we demonstrate how quantum fluctuations at criticality lead to highly non-Gaussian distributions. Interestingly, we show that the distributions for different system sizes collapse on thesame curve after scaling for a wide range of transitions: first and second order quantum transitions and transitions of the Berezinskii–Kosterlitz–Thouless type. We propose and analyse the feasibility of an experimental reconstruction of the distribution using light–matter interfaces for atoms in optical lattices or in optical resonators.

Identification of potential rockfall source areas at a regional scale using a DEM-based geomorphometric analysis

The availability of high resolution Digital Elevation Models (DEM) at a regional scale enables the analysis of topography with high levels of detail. Hence, a DEM-based geomorphometric approach becomes more accurate for detecting potential rockfall sources. Potential rockfall source areas are identified according to the slope angle distribution deduced from high resolution DEM crossed with other information extracted from geological and topographic maps in GIS format. The slope angle distribution can be decomposed in several Gaussian distributions that can be considered as characteristic of morphological units: rock cliffs, steep slopes, footslopes and plains. A terrain is considered as potential rockfall sources when their slope angles lie over an angle threshold, which is defined where the Gaussian distribution of the morphological unit "Rock cliffs" become dominant over the one of "Steep slopes". In addition to this analysis, the cliff outcrops indicated by the topographic maps were added. They contain however "flat areas", so that only the slope angles values above the mode of the Gaussian distribution of the morphological unit "Steep slopes" were considered. An application of this method is presented over the entire Canton of Vaud (3200 km2), Switzerland. The results were compared with rockfall sources observed on the field and orthophotos analysis in order to validate the method. Finally, the influence of the cell size of the DEM is inspected by applying the methodology over six different DEM resolutions.

Validation of tissue modelization and classification techniques in T1-weighted MR brain images

We propose a deep study on tissue modelization andclassification Techniques on T1-weighted MR images. Threeapproaches have been taken into account to perform thisvalidation study. Two of them are based on FiniteGaussian Mixture (FGM) model. The first one consists onlyin pure gaussian distributions (FGM-EM). The second oneuses a different model for partial volume (PV) (FGM-GA).The third one is based on a Hidden Markov Random Field(HMRF) model. All methods have been tested on a DigitalBrain Phantom image considered as the ground truth. Noiseand intensity non-uniformities have been added tosimulate real image conditions. Also the effect of ananisotropic filter is considered. Results demonstratethat methods relying in both intensity and spatialinformation are in general more robust to noise andinhomogeneities. However, in some cases there is nosignificant differences between all presented methods.

Gene filtering with optimal threshold selection

Gene filtering is a useful preprocessing technique often applied to microarray datasets. However, it is no common practice because clear guidelines are lacking and it bears the risk of excluding some potentially relevant genes. In this work, we propose to model microarray data as a mixture of two Gaussian distributions that will allow us to obtain an optimal filter threshold in terms of the gene expression level.

Analysis of Stochastic Volatility Sequences Generated by Product Autoregressive Models

The classical methods of analysing time series by Box-Jenkins approach assume that the observed series uctuates around changing levels with constant variance. That is, the time series is assumed to be of homoscedastic nature. However, the nancial time series exhibits the presence of heteroscedasticity in the sense that, it possesses non-constant conditional variance given the past observations. So, the analysis of nancial time series, requires the modelling of such variances, which may depend on some time dependent factors or its own past values. This lead to introduction of several classes of models to study the behaviour of nancial time series. See Taylor (1986), Tsay (2005), Rachev et al. (2007). The class of models, used to describe the evolution of conditional variances is referred to as stochastic volatility modelsThe stochastic models available to analyse the conditional variances, are based on either normal or log-normal distributions. One of the objectives of the present study is to explore the possibility of employing some non-Gaussian distributions to model the volatility sequences and then study the behaviour of the resulting return series. This lead us to work on the related problem of statistical inference, which is the main contribution of the thesis

Retardation effects in ion-ion collisons [collisions]

The modification of the two center screened electronic Coulomb potential due to relativistic kinematical effects is investigated in the Coulomb gauge. Both nuclear and electronic charges were approximated by Gaussian distributions. For ion velocities v/c =0.1 the effect may roughly be approximated by a 0.1% increase in the effective strength for the monopole term of the two center potential. Thus for ion kinetic energies not exceeding a few MeV/nucleon this relativistic contribution induces small effects on the binding energy of the 1 \omega-electrons except for super critical charges.

Distribución hiperbólica generalizada: una aplicación en la selección de portafolios y en la cuantificación de medidas de riesgo de mercado

En este trabajo se implementa una metodología para incluir momentos de orden superior en la selección de portafolios, haciendo uso de la Distribución Hiperbólica Generalizada, para posteriormente hacer un análisis comparativo frente al modelo de Markowitz.