Please use this identifier to cite or link to this item: http://hdl.handle.net/2381/40129
Title: Modelling Share Prices as a Random Walk on a Markov Chain
Authors: Samci Karadeniz, Rukiye
Supervisors: Utev, Sergey
Petrovskiy, Sergei
Award date: 31-Jul-2017
Presented at: University of Leicester
Abstract: In the financial area, a simple but also realistic means of modelling real data is very important. Several approaches are considered to model and analyse the data presented herein. We start by considering a random walk on an additive functional of a discrete time Markov chain perturbed by Gaussian noise as a model for the data as working with a continuous time model is more convenient for option prices. Therefore, we consider the renowned (and open) embedding problem for Markov chains: not every discrete time Markov chain has an underlying continuous time Markov chain. One of the main goals of this research is to analyse whether the discrete time model permits extension or embedding to the continuous time model. In addition, the volatility of share price data is estimated and analysed by the same procedure as for share price processes. This part of the research is an extensive case study on the embedding problem for financial data and its volatility. Another approach to modelling share price data is to consider a random walk on the lamplighter group. Specifically, we model data as a Markov chain with a hidden random walk on the lamplighter group Z3 and on the tensor product of groups Z2 ⊗ Z2. The lamplighter group has a specific structure where the hidden information is actually explicit. We assume that the positions of the lamplighters are known, but we do not know the status of the lamps. This is referred to as a hidden random walk on the lamplighter group. A biased random walk is constructed to fit the data. Monte Carlo simulations are used to find the best fit for smallest trace norm difference of the transition matrices for the tensor product of the original transition matrices from the (appropriately split) data. In addition, splitting data is a key method for both our first and second models. The tensor product structure comes from the split of the data. This requires us to deal with the missing data. We apply a variety of statistical techniques such as Expectation- Maximization Algorithm and Machine Learning Algorithm (C4.5). In this work we also analyse the quantum data and compute option prices for the binomial model via quantum data.
Links: http://hdl.handle.net/2381/40129
Type: Thesis
Level: Doctoral
Qualification: PhD
Rights: Copyright © the author. All rights reserved.
Appears in Collections:Leicester Theses
Theses, Dept. of Mathematics

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