Estimating Probability Distributions of Future Asset Prices: Empirical Transformations from Option-Implied Risk-Neutral to Real-World Density Functions

Author(s):  
Rupert de Vincent-Humphreys ◽  
Joseph Noss
Author(s):  
Suboohi Safdar ◽  
Dr. Ejaz Ahmed

Kurtosis is a commonly used descriptive statistics. Kurtosis “Coefficient of excess” is critically reviewed in different aspects and is called as, measuring the fatness of the tails of the density functions, concentration towards the central value, scattering away from the target point or degree of peakedness of probability distribution. Kurtosis is referred to the shape of the distribution but many distributions having same kurtosis value may have different shapes while Kurtosis may exist when peak of a distribution is not in existence. Through extensive study of kurtosis on several distributions, Wu (2002) introduced a new measure called “W-Peakedness” that offers a fine capture of distribution shape to provide an intuitive measure of peakedness of the distribution which is inversely proportional to the standard deviation of the distribution. In this paper the work is extended for different others continuous probability distributions. Empirical results through simulation illustrate the proposed method to evaluate kurtosis by W-peakedness


Author(s):  
J. L. Cagney ◽  
S. S. Rao

Abstract The modeling of manufacturing errors in mechanisms is a significant task to validate practical designs. The use of probability distributions for errors can simulate manufacturing variations and real world operations. This paper presents the mechanical error analysis of universal joint drivelines. Each error is simulated using a probability distribution, i.e., a design of the mechanism is created by assigning random values to the errors. Each design is then evaluated by comparing the output error with a limiting value and the reliability of the universal joint is estimated. For this, the design is considered a failure whenever the output error exceeds the specified limit. In addition, the problem of synthesis, which involves the allocation of tolerances (errors) for minimum manufacturing cost without violating a specified accuracy requirement of the output, is also considered. Three probability distributions — normal, Weibull and beta distributions — were used to simulate the random values of the errors. The similarity of the results given by the three distributions suggests that the use of normal distribution would be acceptable for modeling the tolerances in most cases.


Author(s):  
R. T. Scott ◽  
G. A. Gabriele

Abstract An exact constraint scheme based on the physical contacting constraints of real part mating features is used to represent the process of assembling the parts. To provide useful probability information about how assembly dimensions are distributed when the parts are assembled as intended, the real world constraints that would prevent interference are ignored. This work addresses some limitations in the area of three dimensional assembly tolerance analysis. As a result of this work, the following were demonstrated: 1. Assembly of parts whose assembly mating features are subjected to variation; 2. Assemble parts using a real world set of exact constraints; 3. Provide probability distributions of assembly dimensions.


Author(s):  
Opeoluwa Akinradewo ◽  
Clinton Aigbavboa ◽  
Ayodeji Emmanuel Oke ◽  
Harrison Coffie

One of the vital success elements of a construction project is the accuracy of the estimation of construction cost. This study is aimed at developing a cost profile for road projects in Ghana. Pro-forma was designed to retrieve historical cost data of completed road projects in Ghana. The pro-forma retrieved data such as the initial budgeted cost and final construction cost of road projects, location of road projects, features of road projects, the scope of road projects (New project, renovation work, upgrade work or replacement work), type of road projects and classification of road projects. Cost data were analysed using descriptive analysis and probability distributions such as Cumulative Density Functions and Probability Density Functions. From findings, estimates prepared for road projects in Ghana can be expected to be below the final construction cost by about 20% while most of the completed road projects in Ghana experience cost overrun.


2020 ◽  
Vol 23 (03) ◽  
pp. 2050020
Author(s):  
DAVID CRIENS

We show that for time-inhomogeneous Markovian Heath–Jarrow–Morton models driven by an infinite-dimensional Brownian motion and a Poisson random measure an equivalent change of measure exists whenever the real-world and the risk-neutral dynamics can be defined uniquely and are related via a drift and a jump condition.


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