arXiv q-fin· Akash Deep, Bhathiya Divelgama, A. Alexandre Trindade, W. Brent Lindquist, Svetlozar T. Rachev, Frank J. Fabozzi·· 13 hr agoAI Score55
Probability Weighting Functions for Normal Tempered-Stable Distributions: Orthogonal Channels and Information-Theoretic Indices
Probability-Weighting Functions for Normal Tempered-Stable Laws: Orthogonal Channels and Information-Theoretic Indices
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This arXiv paper proposes constructing probability weighting functions from changes in return distributions rather than parameter families, with the formula w(p)=F_post(F_prior^{-1}(p)). Both the prior and posterior are normal tempered-stable distributions, and the posterior differs from the prior along three independent channels—scale, skewness, and tail thickness—under the premise of fixed variance.
Source:arXiv q-fin · arxiv.org
Risk ManagementValuation and Asset PricingPaper Research#Papers / Research#arXiv#Risk Management#Valuation / Asset Pricing