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Oliver Pfante

Publications and source records attributed to Oliver Pfante.

7 recordsLinked to original sources
arXiv2016

Uncertainty Estimates in the Heston Model via Fisher Information

We address the information content of European option prices about volatility in terms of the Fisher information matrix. We assume that observed option prices are centred on the theoretical price provided by Heston's model disturbed by additive Gaussian noise. We fit the likelihood function on the components of the VIX, i.e., near- and next-term put and call options on the S&P 500 with more than 23 days and less than 37 days to expiration and non-vanishing bid, and compute their Fisher information matrices from the Greeks in the Heston model. We find that option prices allow reliable estimates of volatility with negligible uncertainty as long as volatility is large enough. Interestingly, if volatility drops below a critical value, inferences from option prices become impossible because Vega, the derivative of a European option w.r.t. volatility, nearly vanishes.

q-fin.ST↗
arXiv2016

Volatility Inference and Return Dependencies in Stochastic Volatility Models

Stochastic volatility models describe stock returns $r_t$ as driven by an unobserved process capturing the random dynamics of volatility $v_t$. The present paper quantifies how much information about volatility $v_t$ and future stock returns can be inferred from past returns in stochastic volatility models in terms of Shannon's mutual information.

q-fin.MF↗
arXiv2015

Inferring Volatility in the Heston Model and its Relatives -- an Information Theoretical Approach

Stochastic volatility models describe asset prices $S_t$ as driven by an unobserved process capturing the random dynamics of volatility $σ_t$. Here, we quantify how much information about $σ_t$ can be inferred from asset prices $S_t$ in terms of Shannon's mutual information $I(S_t : σ_t)$. This motivates a careful numerical and analytical study of information theoretic properties of the Heston model. In addition, we study a general class of discrete time models motivated from a machine learning perspective. In all cases, we find a large uncertainty in volatility estimates for quite fundamental information theoretic reasons.

q-fin.ST↗
arXiv2012

A Chern-Simons action for noncommutative spaces in general with the example SU_q(2)

Witten constructed a topological quantum field theory with the Chern-Simons action as Lagrangian. We define a Chern-Simons action for 3-dimensional spectral triples. We prove gauge invariance of the Chern-Simons action, and we prove that it concurs with the classical one in the case the spectral triple comes from a 3-dimensional spin manifold. In contrast to the classical Chern-Simons action, or a noncommutative generalization of it introduced by A. H. Chamseddine, A. Connes, and M. Marcolli by use of cyclic cohomology, the formula of our definition contains a linear term which shifts the critical points of the action, i. e. the solutions of the corresponding variational problem. Additionally, we investigate and compute the action for a particular example: the quantum group SU_q(2). Two different spectral triples were constructed for SU_q(2). We investigate the Chern-Simons action, defined in the present paper, in both cases, and conclude the non-topological nature of the action. Using the Chern-Simons action as Lagrangian we define and compute the path integral, at least conceptually.

math.OA↗
arXiv2012

Chern-Simons theory for the noncommutative 3-torus

We study the Chern-Simons action, which was defined for noncommutative spaces in general by the author, for the noncommutative 3-torus, the universal C*-algebra generated by 3 unitaries. D. Essouabri, B. Iochum, C. Levy, and A. Sitarz constructed a spectral triple for the noncommutative 3-torus. We compute the Chern-Simons action for this noncommutative space. In connection with this computation we calculate the first coefficient in the loop expansion series of the corresponding Feynman path integral with the Chern-Simons action as Lagrangian. The result is independent of the deformation matrix of the noncommutative 3-torus and always 0.

math.OA↗
arXiv2009

Equivariant K-theory of finite dimensional real vector spaces

We give a general formula for the equivariant complex $K$-theory $K_G^*(V)$ of a finite dimensional real linear space $V$ equipped with a linear action of a compact group $G$ in terms of the representation theory of a certain double cover of $G$. Using this general formula, we give explicit computations in various interesting special cases. In particular, as an application we obtain explicit formulas for the $K$-theory of $C_r^*(GL(n,\RR))$, the reduced group C*-algebra of $GL(n,\RR)$.

math.KT↗