Questions tagged [distribution]
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13
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32
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How to derive the implied probability distribution from B-S volatilities?
The general problem I have is visualization of the implied distribution of returns of a currency pair.
I usually use QQplots for historical returns, so for example versus the normal distribution:
...
- 1,150
24
votes
3
answers
5k
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Tools in R for estimating time-varying copulas?
Are there libraries in R for estimating time-varying joint distributions via copulas?
Hedibert Lopes has an excellent paper on the topic here. I know there is an existing packaged called copula but ...
- 13.5k
14
votes
8
answers
6k
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Consensus on Cauchy distribution for stock prices
What is the general consensus for using a Cauchy distribution to model stock prices? I can't find much after researching online and wonder if it has been tried and discarded.
My motivation is to find ...
- 317
11
votes
1
answer
1k
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Is volatility for the next day forecastable? To any extent?
In a more general way: is there
1) a methodological approach to quantify the correctness of a model that produces a probability distribution for the, say, S&P 500 index return for the next ...
- 153
10
votes
1
answer
459
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What distribution should I apply to estimate the likelihood of extreme returns?
Say I have a limited sample, a month of daily returns, and I want to estimate the 99.5th percentile of the distribution of absolute daily returns.
Because the estimate will require extrapolation, I ...
- 537
8
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3
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380
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Can Gaussianity of returns depend on the time frame?
I would be interested in knowing if the fact that returns are Gaussian is disproved on all time frames, or if, for example, the 5 minute intra-day time frame could exhibits Gaussian returns assuming ...
- 367
3
votes
1
answer
360
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What are $d_1$ and $d_2$ for Laplace?
What are the formulae for d1 & d2 using a Laplace distribution?
user3232
3
votes
1
answer
589
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Use NIG distribution to model stock path
I would like to use Monte Carlo simulation to price some options. First I use standard approach where stock price is discribed by the following process:
$$S_T = S_0\exp \left[(r - 0.5\sigma^2)T + \...
- 456
2
votes
1
answer
216
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Is it always better to use the entire distribution of a financial returns series, not just $\mu$ and $\sigma$?
In finance models that use historical returns for inputs, including option pricing models, forecasting and portfolio optimization, only the statistical moments of the returns distribution, $\mu$ and $\...
- 2,980
2
votes
1
answer
449
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Quantile normal and lognormal
Let's assume we have a normal distribution $X\sim \mathcal{N}(\mu,\sigma^2)$. In a normal distribution the quantile can be calculated as follows:
\begin{equation}
\Phi_X ^{-1}(p)=\mu +\sigma {\sqrt {...
- 123
2
votes
2
answers
212
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Problem with obtaining densities
For my research I need to obtain a series of densities, however, I am encountering some problems.
The first problem is perhaps very simple, but the answer eludes me. Let's say I have an observation ...
- 491
1
vote
2
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236
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Can I apply the Kelly criterion directly, without fitting any distributions?
Problem
I want to apply the Kelly criterion to asset returns, so that I know how much to hold of each, ideally (and how much I should keep as a cash reserve).
As far as I understand the Kelly ...
- 123
1
vote
0
answers
742
views
Large deviations theory and extreme value theory
I'll enter into details of both, sooner or later, but for the moment I'm concerned about the differences (and relationships, if any) between these two theories. Can someone give me a brief, but still ...
- 575