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| Autori principali: | , |
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| Natura: | Preprint |
| Pubblicazione: |
2025
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| Soggetti: | |
| Accesso online: | https://arxiv.org/abs/2512.08851 |
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| _version_ | 1866908702235164672 |
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| author | Egger, Daniel Vestal, Jacob |
| author_facet | Egger, Daniel Vestal, Jacob |
| contents | Hoeffding's Inequality provides the maximum probability that a series of n draws from a bounded random variable differ from the variable's true expectation u by more than given tolerance t. The random variable is typically the error rate of a classifier in machine learning applications. Here, a trading strategy is premised on the assumption of an underlying distribution of causal factors, in other words, a market regime, and the random variable is the performance of that trading strategy. A larger deviation of observed performance from the trader's expectation u can be characterized as a lower probability that the financial regime supporting that strategy remains in force, and a higher probability of financial regime change. The changing Hoeffding probabilities can be used as an early warning indicator of this change. |
| format | Preprint |
| id |
arxiv_https___arxiv_org_abs_2512_08851 |
| institution | arXiv |
| publishDate | 2025 |
| record_format | arxiv |
| spellingShingle | A New Application of Hoeffding's Inequality Can Give Traders Early Warning of Financial Regime Change Egger, Daniel Vestal, Jacob Risk Management Probability Hoeffding's Inequality provides the maximum probability that a series of n draws from a bounded random variable differ from the variable's true expectation u by more than given tolerance t. The random variable is typically the error rate of a classifier in machine learning applications. Here, a trading strategy is premised on the assumption of an underlying distribution of causal factors, in other words, a market regime, and the random variable is the performance of that trading strategy. A larger deviation of observed performance from the trader's expectation u can be characterized as a lower probability that the financial regime supporting that strategy remains in force, and a higher probability of financial regime change. The changing Hoeffding probabilities can be used as an early warning indicator of this change. |
| title | A New Application of Hoeffding's Inequality Can Give Traders Early Warning of Financial Regime Change |
| topic | Risk Management Probability |
| url | https://arxiv.org/abs/2512.08851 |