SSRN Author: David E. HarrisDavid E. Harris SSRN Content
https://www.ssrn.com/author=1541471
https://www.ssrn.com/rss/en-usThu, 13 Dec 2018 01:14:36 GMTeditor@ssrn.com (Editor)Thu, 13 Dec 2018 01:14:36 GMTwebmaster@ssrn.com (WebMaster)SSRN RSS Generator 1.0REVISION: A Test of a Generalized Stochastic CalculusIt has been in the literature since 1963 when Mandelbrot published The Variation of Certain Speculative Prices that returns on equity securities have heavy tails. In a 2014 article, Harris derives a mathematical reason these tails must be heavy. This proof in turn excludes mean-variance finance as either a model or as an approximation of reality. This paper tests the two competing sets of models treating the model itself as a parameter. Following the work of Alan Turing and IJ Good, this paper does a population study of all annual returns in the CRSP universe of securities from 1925-2013 and excludes mean-variance based models with a probability sufficiently close to unity that further discussion of mean-variance models is no longer necessary.
https://www.ssrn.com/abstract=2653151
https://www.ssrn.com/1746162.htmlTue, 11 Dec 2018 14:16:30 GMTREVISION: A Generalization of Stochastic Calculus--A ConjectureExisting models of calculus in finance, such as Ito calculus have an underlying assumption that the parameters are known. This paper relaxes that assumption. The paper proposes the creation of differentiable paths that do not require an expectation to exist. Further, the path minimizes the expected loss from using a predictive calculus and, under mild conditions, stochastically dominates any other path. Further, the path is assured to produce fair gambling odds if used in finance. This method maps to Ito and Stratonovich methods if the parameters are known and dominate them if they are not in the general case.
https://www.ssrn.com/abstract=3197451
https://www.ssrn.com/1743383.htmlSat, 01 Dec 2018 11:40:02 GMTREVISION: A Generalization of Stochastic Calculus--A ConjectureExisting models of calculus in finance, such as Ito calculus have an underlying assumption that the parameters are known. This paper relaxes that assumption. The paper proposes the creation of differentiable paths that do not require an expectation to exist. Further, the path minimizes the expected loss from using a predictive calculus and, under mild conditions, stochastically dominates any other path. Further, the path is assured to produce fair gambling odds if used in finance. This method maps to Ito and Stratonovich methods if the parameters are known and dominate them if they are not in the general case.
https://www.ssrn.com/abstract=3197451
https://www.ssrn.com/1739049.htmlWed, 14 Nov 2018 16:06:28 GMTREVISION: A Generalization of Stochastic Calculus--A ConjectureExisting models of calculus in finance, such as Ito calculus have an underlying assumption that the parameters are known. This paper relaxes that assumption. The paper proposes the creation of differentiable paths that do not require an expectation to exist. Further, the path minimizes the expected loss from using a predictive calculus and, under mild conditions, stochastically dominates any other path. Further, the path is assured to produce fair gambling odds if used in finance. This method maps to Ito and Stratonovich methods if the parameters are known and dominate them if they are not in the general case.
https://www.ssrn.com/abstract=3197451
https://www.ssrn.com/1735386.htmlThu, 01 Nov 2018 16:09:02 GMTREVISION: A Bayesian Calculus?A conjecture is asserted that a Bayesian stochastic calculus exists and that it is the sole admissible modeling method under exponential growth.
https://www.ssrn.com/abstract=3197451
https://www.ssrn.com/1704338.htmlMon, 02 Jul 2018 19:18:29 GMTREVISION: Pricing European Style OptionsThe Black-Scholes option model created a revolution in finance. It was perceived that the model opened up a methodology to price option contracts. The methodology has been problematic as numerous empirical contradictions and anomalies have been noted. Born out of Frequentist decision theory, a key assumption in the formula is that all parameters are known. When viewed as an estimator, however, it is shown that it does not converge to a population parameter. Consequently, a new model is built using Bayesian decision theory rather than Frequentist decision theory. This is done as it assures that the estimator will be both admissible and coherent, something that cannot generally happen with existing methods using Ito calculus or binomial trees. The model proposed is derived in two distinct ways. The first is both distribution-free and presumes no first moment. The second follows the work of Harris in deriving the density functions of various asset classes. The former should be ...
https://www.ssrn.com/abstract=2653255
https://www.ssrn.com/1693961.htmlSun, 20 May 2018 17:06:06 GMTREVISION: Pricing European Style OptionsThe Black-Scholes option model created a revolution in finance. It was perceived that the model opened up a methodology to price option contracts. The methodology has been problematic as numerous empirical contradictions and anomalies have been noted. Born out of Frequentist decision theory, a key assumption in the formula is that all parameters are known. When viewed as an estimator, however, it is shown that it does not converge to a population parameter. Consequently, a new model is built using Bayesian decision theory rather than Frequentist decision theory. This is done as it assures that the estimator will be both admissible and coherent, something that cannot generally happen with existing methods using Ito calculus or binomial trees. The model proposed is derived in two distinct ways. The first is both distribution-free and presumes no first moment. The second follows the work of Harris in deriving the density functions of various asset classes. The former should be ...
https://www.ssrn.com/abstract=2653255
https://www.ssrn.com/1674451.htmlFri, 09 Mar 2018 07:45:27 GMTREVISION: Pricing European Style Equity OptionsThe Black-Scholes option model created a revolution in finance. It was perceived that the model opened up a methodology to price option contracts. The methodology has been problematic as numerous empirical contradictions and anomalies have been noted. Born out of Frequentist decision theory, a key assumption in the formula is that all parameters are known. When viewed as an estimator, however, it is shown that it does not converge to a population parameter. Consequently, a new model is built using Bayesian decision theory rather than Frequentist decision theory. This is done as it assures that the estimator will be both admissible and coherent, something that cannot generally happen with existing methods using Ito calculus or binomial trees. The model proposed is derived in two distinct ways. The first is both distribution-free and presumes no first moment. The second follows the work of Harris in deriving the density functions of various asset classes. The former should be ...
https://www.ssrn.com/abstract=2653255
https://www.ssrn.com/1670329.htmlSun, 25 Feb 2018 13:40:02 GMTREVISION: Why Practitioners Should Use Bayesian StatisticsA 2017 paper by Harris argues that financial returns are a mixture distribution and that the dominant distribution is the truncated Cauchy distribution. Both the mixture nature and the poor properties of the truncated Cauchy distribution functionally exclude both the Frequentist and the Likelihoodist methodologies. In addition, restrictions known to exist in the parameters cause the available methods to be inadmissible, biased solutions. Only the Bayesian methodology results in statistics and predictions that are admissible and coherent.
https://www.ssrn.com/abstract=2656681
https://www.ssrn.com/1663062.htmlTue, 30 Jan 2018 17:20:32 GMT