Renyi entropy based design of heavy tailed distribution for return of financial assets

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F68407700%3A21340%2F24%3A00374887" target="_blank" >RIV/68407700:21340/24:00374887 - isvavai.cz</a>
Result on the web
<a href="https://doi.org/10.1016/j.physa.2024.129531" target="_blank" >https://doi.org/10.1016/j.physa.2024.129531</a>
DOI - Digital Object Identifier
<a href="http://dx.doi.org/10.1016/j.physa.2024.129531" target="_blank" >10.1016/j.physa.2024.129531</a>

Result language
angličtina
Original language name
Renyi entropy based design of heavy tailed distribution for return of financial assets
Original language description
It is well-known that returns of financial assets exhibit heavy tail property and there has been no distribution which can reliably capture this characteristic so far. To contribute to the solution of this problem, we derive a new heavy tail distribution using the maximum entropy principle for Renyi entropy under the absolute moment constraints. Our newly derived distribution with two shape parameters forms a family of distributions. They are smooth, scaleable, symmetric and may be heavy tailed if their shape parameter attains the appropriate value. As a result, parameters of this distribution can be estimated by maximum likelihood estimation technique. The ability of the derived distribution to model the heavy tail property of financial assets is verified on a range of financial instruments. The results we obtained show that it can be a better option for modeling the returns of financial assets compared to other well-known heavy tailed distributions
Czech name
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Czech description
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Type
J<sub>imp</sub> - Article in a specialist periodical, which is included in the Web of Science database
CEP classification
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OECD FORD branch
10700 - Other natural sciences

Publication year
2024
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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