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Is a probabilistic modeling really useful in financial engineering? - A-t-on vraiment besoin d'un mod\`ele probabiliste en ing\'enierie financi\`ere ?

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  • Michel Fliess

    (LIX)

  • C'edric Join

    (CRAN, INRIA Saclay - Ile de France)

  • Fr'ed'eric Hatt

Abstract

A new standpoint on financial time series, without the use of any mathematical model and of probabilistic tools, yields not only a rigorous approach of trends and volatility, but also efficient calculations which were already successfully applied in automatic control and in signal processing. It is based on a theorem due to P. Cartier and Y. Perrin, which was published in 1995. The above results are employed for sketching a dynamical portfolio and strategy management, without any global optimization technique. Numerous computer simulations are presented.

Suggested Citation

  • Michel Fliess & C'edric Join & Fr'ed'eric Hatt, 2011. "Is a probabilistic modeling really useful in financial engineering? - A-t-on vraiment besoin d'un mod\`ele probabiliste en ing\'enierie financi\`ere ?," Papers 1104.2124, arXiv.org, revised May 2011.
    • Handle: RePEc:arx:papers:1104.2124
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    References listed on IDEAS

    as
    1. Gourieroux,Christian & Monfort,Alain, 1997. "Time Series and Dynamic Models," Cambridge Books, Cambridge University Press, number 9780521423083, October.
    2. Michel Fliess & Cédric Join & Frédéric Hatt, 2011. "Volatility made observable at last," Post-Print hal-00562488, HAL.
    3. Michel Fliess & Cédric Join & Mamadou Mboup, 2010. "Algebraic change-point detection," Post-Print inria-00439226, HAL.
    4. Paul A. Samuelson, 2011. "Lifetime Portfolio Selection by Dynamic Stochastic Programming," World Scientific Book Chapters, in: Leonard C MacLean & Edward O Thorp & William T Ziemba (ed.), THE KELLY CAPITAL GROWTH INVESTMENT CRITERION THEORY and PRACTICE, chapter 31, pages 465-472, World Scientific Publishing Co. Pte. Ltd..
    5. William F. Sharpe, 1965. "Mutual Fund Performance," The Journal of Business, University of Chicago Press, vol. 39, pages 119-119.
    6. Michel Fliess & Cédric Join, 2009. "Systematic risk analysis: first steps towards a new definition of beta," Post-Print inria-00425077, HAL.
    7. Michel Fliess & C'edric Join, 2009. "A mathematical proof of the existence of trends in financial time series," Papers 0901.1945, arXiv.org.
    8. repec:dau:papers:123456789/13604 is not listed on IDEAS
    9. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    10. Michel Fliess & Cédric Join, 2009. "A mathematical proof of the existence of trends in financial time series," Post-Print inria-00352834, HAL.
    11. Michel Fliess & C'edric Join & Fr'ed'eric Hatt, 2011. "Volatility made observable at last," Papers 1102.0683, arXiv.org.
    12. Michel Fliess & C'edric Join, 2010. "Delta Hedging in Financial Engineering: Towards a Model-Free Approach," Papers 1005.0194, arXiv.org.
    13. Robert Engle, 2001. "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 157-168, Fall.
    14. Michel Fliess & Cédric Join, 2009. "Towards new technical indicators for trading systems and risk management," Post-Print inria-00370168, HAL.
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