A mathematical proof of the existence of trends in financial time series

Michel Fliess 1, 2 Cédric Join 2, 3
2 ALIEN - Algebra for Digital Identification and Estimation
Inria Lille - Nord Europe, Inria Saclay - Ile de France, Ecole Centrale de Lille, X - École polytechnique, CNRS - Centre National de la Recherche Scientifique : UMR8146
Abstract : We are settling a longstanding quarrel in quantitative finance by proving the existence of trends in financial time series thanks to a theorem due to P. Cartier and Y. Perrin, which is expressed in the language of nonstandard analysis (Integration over finite sets, F. & M. Diener (Eds): Nonstandard Analysis in Practice, Springer, 1995, pp. 195--204). Those trends, which might coexist with some altered random walk paradigm and efficient market hypothesis, seem nevertheless difficult to reconcile with the celebrated Black-Scholes model. They are estimated via recent techniques stemming from control and signal theory. Several quite convincing computer simulations on the forecast of various financial quantities are depicted. We conclude by discussing the rôle of probability theory.
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Dernière modification le : jeudi 10 mai 2018 - 02:06:40
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  • HAL Id : inria-00352834, version 1
  • ARXIV : 0901.1945

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Michel Fliess, Cédric Join. A mathematical proof of the existence of trends in financial time series. A. EL JAI and L. AFIFI and E. ZERRIK. Systems Theory: Modelling, Analysis and Control, May 2009, Fes, Morocco. Presses Universitaires de Perpignan, pp.43-62, 2009, Etudes. 〈inria-00352834〉

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