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|Title:||Path integral for equities: Dynamic correlation and empirical analysis|
|Authors:||Baaquie, B.E. |
Higher derivative Lagrangian
|Source:||Baaquie, B.E., Cao, Y., Lau, A., Tang, P. (2012-02-15). Path integral for equities: Dynamic correlation and empirical analysis. Physica A: Statistical Mechanics and its Applications 391 (4) : 1408-1427. ScholarBank@NUS Repository. https://doi.org/10.1016/j.physa.2011.09.039|
|Abstract:||This paper develops a model to describe the unequal time correlation between rate of returns of different stocks. A non-trivial fourth order derivative Lagrangian is defined to provide an unequal time propagator, which can be fitted to the market data. A calibration algorithm is designed to find the empirical parameters for this model and different de-noising methods are used to capture the signals concealed in the rate of return. The detailed results of this Gaussian model show that the different stocks can have strong correlation and the empirical unequal time correlator can be described by the model's propagator. This preliminary study provides a novel model for the correlator of different instruments at different times. © 2011 Elsevier B.V. All rights reserved.|
|Source Title:||Physica A: Statistical Mechanics and its Applications|
|Appears in Collections:||Staff Publications|
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