Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets

This paper investigates the presence of bull and bear market states in stock price dynamics. A new definition of bull and bear market states based on sequences of stopping times tracing local peaks and troughs in stock prices is proposed. Duration dependence in stock prices is investigated through posterior mode estimates of the hazard function in bull and bear markets. We find that the longer a bull market has lasted, the lower is the probability that it will come to a termination. In contrast, the longer a bear market has lasted, the higher is its termination probability. Interest rates are also found to have an important effect on cumulated changes in stock prices: increasing interest rates are associated with an increase in bull market hazard rates and a decrease in bear market hazard rates.

Statistical theory of relaxation of high energy electrons in quantum Hall edge states

We investigate theoretically the energy exchange between electrons of two co-propagating, out-of-equilibrium edge states with opposite spin polarization in the integer quantum Hall regime. A quantum dot tunnel-coupled to one of the edge states locally injects electrons at high energy. Thereby a narrow peak in the energy distribution is created at high energy above the Fermi level. A second downstream quantum dot performs an energy resolved measurement of the electronic distribution function. By varying the distance between the two dots, we are able to follow every step of the energy exchange and relaxation between the edge states - even analytically under certain conditions. In the absence of translational invariance along the edge, e.g. due to the presence of disorder, energy can be exchanged by non-momentum conserving two-particle collisions. For weakly broken translational invariance, we show that the relaxation is described by coupled Fokker-Planck equations. From these we find that relaxation of the injected electrons can be understood statistically as a generalized drift-diffusion process in energy space for which we determine the drift-velocity and the dynamical diffusion parameter. Finally, we provide a physically appealing picture in terms of individual edge state heating as a result of the relaxation of the injected electrons.Comment: 13 pages plus 6 appendices, 8 figures. Supplemental Material can be found on http://quantumtheory.physik.unibas.ch/people/nigg/supp_mat.htm

Hybrid scheme for Brownian semistationary processes

We introduce a simulation scheme for Brownian semistationary processes, which is based on discretizing the stochastic integral representation of the process in the time domain. We assume that the kernel function of the process is regularly varying at zero. The novel feature of the scheme is to approximate the kernel function by a power function near zero and by a step function elsewhere. The resulting approximation of the process is a combination of Wiener integrals of the power function and a Riemann sum, which is why we call this method a hybrid scheme. Our main theoretical result describes the asymptotics of the mean square error of the hybrid scheme and we observe that the scheme leads to a substantial improvement of accuracy compared to the ordinary forward Riemann-sum scheme, while having the same computational complexity. We exemplify the use of the hybrid scheme by two numerical experiments, where we examine the finite-sample properties of an estimator of the roughness parameter of a Brownian semistationary process and study Monte Carlo option pricing in the rough Bergomi model of Bayer et al. [Quant. Finance 16(6), 887-904, 2016], respectively.Comment: 33 pages, 4 figures, v4: minor revision, in particular we have derived a new expression (3.5), equivalent to the previous one but numerically more convenient, for the off-diagonal elements of the covariance matrix Sigm