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SOE: Fachverband Physik sozio-ökonomischer Systeme
SOE 3: Financial Markets and Risk Management II
SOE 3.1: Vortrag
Montag, 11. März 2013, 10:45–11:00, H37
Alternate entropy measure for assessing volatility in financial markets — •Kay Hamacher1 and Ranjan Bose2 — 1Department of Computer Science, Department of Physics & Department of Biology, Technische Universitaet Darmstadt, Germany — 2Department of Electrical Engineering, IIT Delhi, Hauz Khas, New Delhi, India
(Stock) market dynamics has become the ultimate challenge for our understanding of complex system dynamics. Thus, new ways to probe properties of the dynamics is an important step towards a better understanding - in particular, since simple pdfs were disregarded as the typical dynamics is governed by non-Gaussian fluctuations.
Here [1], we propose superinformation [2], which is a measure of the disorder of the entropy of general data sets. Besides obvious signals - such as the 2008 financial crisis - we were able to extract relations to volatility measures; an important quantity on which derivates are traded. In particular, we observe correlations to the VIX index.
Going on step further, we introduce the super mutual information. Signatures were observed whose exploitation might be used to mitigate idiosyncratic risk.
[1] K. Hamacher, R. Bose. "Alternate entropy measure for assessing volatility in financial markets" Phys. Rev. E, 86(5):056112, 2012.
[2] R. Bose, S. Chouhan. Phys. Rev. E 83, 051918 (2011).