Entropy-Maximizing Dynamics of Continuous Markets
Fuente:
arXiv
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| Format: | Preprint |
| Published: |
2023
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| _version_ | 1866914715303673856 |
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| author | Platen, Eckhard |
| author_facet | Platen, Eckhard |
| contents | By assuming the existence of the growth optimal portfolio (GOP), the stationarity of GOP-volatilities, and the maximization of relative entropy, the paper applies the benchmark approach to the modeling of the long-term dynamics of continuous markets. It reveals conservation laws, where the GOP is shown to follow a time-transformed squared Bessel process of dimension four. Moreover, it predicts the convergence of the averages of the GOP-volatilities with respect to the driving independent Brownian motions toward a common level. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2403_09652 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | Entropy-Maximizing Dynamics of Continuous Markets Platen, Eckhard General Mathematics By assuming the existence of the growth optimal portfolio (GOP), the stationarity of GOP-volatilities, and the maximization of relative entropy, the paper applies the benchmark approach to the modeling of the long-term dynamics of continuous markets. It reveals conservation laws, where the GOP is shown to follow a time-transformed squared Bessel process of dimension four. Moreover, it predicts the convergence of the averages of the GOP-volatilities with respect to the driving independent Brownian motions toward a common level. |
| title | Entropy-Maximizing Dynamics of Continuous Markets |
| topic | General Mathematics |
| url | https://arxiv.org/abs/2403.09652 |