Saturday, February 06, 2016

Mathematical Economics and the mind of an Insider Trader...

In the University of Vaasa the department of Mathematics and Statistics does - according to the latest evaluation report of the university - very high level research. The three fields of the department are Mathematics, Mathematics in Economics and Statistics.
PhD student of the department Adil Yazigi had his public defence last fall about Gaussian processes, their representations and regularity.

Yazigi studied the regularity of the sample paths of Gaussian processes and gave a necessary and sufficient condition for Hölder continuity. He also introduce the canonical Volterra representation for self-similar Gaussian processes based on the Lamperti transformation and on the canonical Volterra representation of stationary Gaussian processes.

This probably doesn't say much to those who haven't studied Mathematics at the university level (like me). But....

there is an interesting application to Finance. Yazigi uses the generalized Gaussian bridge model to analyse and to solve the insider trading problem.

– Given a financial market where an insider trader knows at the beginning of the time the final value of a specific asset, the Gaussian bridge model can explain how the price of this asset moves from the randomness to the certainty in the insider agent's point of view, says Adil Yazigi in the University's press release..

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