Maximum entropy distribution of stock price fluctuations (Articolo in rivista)

Type
Label
  • Maximum entropy distribution of stock price fluctuations (Articolo in rivista) (literal)
Anno
  • 2013-01-01T00:00:00+01:00 (literal)
Http://www.cnr.it/ontology/cnr/pubblicazioni.owl#doi
  • 10.1016/j.physa.2012.11.048 (literal)
Alternative label
  • Bartiromo, Rosario (2013)
    Maximum entropy distribution of stock price fluctuations
    in Physica. A (Print)
    (literal)
Http://www.cnr.it/ontology/cnr/pubblicazioni.owl#autori
  • Bartiromo, Rosario (literal)
Pagina inizio
  • 1638 (literal)
Pagina fine
  • 1647 (literal)
Http://www.cnr.it/ontology/cnr/pubblicazioni.owl#numeroVolume
  • 392 (literal)
Rivista
Http://www.cnr.it/ontology/cnr/pubblicazioni.owl#numeroFascicolo
  • 7 (literal)
Note
  • ISI Web of Science (WOS) (literal)
Http://www.cnr.it/ontology/cnr/pubblicazioni.owl#affiliazioni
  • Bartiromo, R (Reprint Author), Univ Roma Tre, Dipartimento Fis, Via Vasca Navale 84, I-00146 Rome, Italy. Bartiromo, Rosario, CNR, Ist Struttura Mat, I-00133 Rome, Italy. Bartiromo, Rosario, Univ Roma Tre, Dipartimento Fis, I-00146 Rome, Italy. (literal)
Titolo
  • Maximum entropy distribution of stock price fluctuations (literal)
Abstract
  • In this paper we propose to use the principle of absence of arbitrage opportunities in its entropic interpretation to obtain the distribution of stock price fluctuations by maximizing its information entropy. We show that this approach leads to a physical description of the underlying dynamics as a random walk characterized by a stochastic diffusion coefficient and constrained to a given value of the expected volatility, in this way taking into account the information provided by the existence of an option market. The model is validated by a comprehensive comparison with observed distributions of both price return and diffusion coefficient. Expected volatility is the only parameter in the model and can be obtained by analysing option prices. We give an analytic formulation of the probability density function for price returns which can be used to extract expected volatility from stock option data. (C) 2012 Elsevier B.V. All rights reserved. (literal)
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