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A NEW NOTION OF TRANSITIVE RELATIVE RETURN RATE AND ITS APPLICATIONS USING STOCHASTIC DIFFERENTIAL EQUATIONS

ABSTRACT
We introduce a new notion of transitive relative return rate and present its applications based on the stochastic differential equations. First, we define the notion of a relative return rate (RRR) and show how to construct the transitive relative return rate (TRRR) on it. Then, we state some propositions and theorems about RRR and TRRR and prove them. Moreover, we exhibit the theoretical framework of the generalization of TRRR for n≥3 cases and prove it, as well. Furthermore, we illustrate our approach with real data applications of daily relative return rates for Borsa Istanbul-30 (BIST-30) and Intel Corporation (INTC) indexes with respect to daily interest rate of Central Bank of the Republic of Turkey (CBRT) between 18.06.2003 and 17.06.2013. For this purpose, we perform simulations via Milstein method. We succeed to present usefulness of the relative return rate for the relevant real large data set using the numerical solution of the stochastic differential equations. The simulation results show that the proposed closely approximates the real data.
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PAPER SUBMITTED: 2018-09-15
PAPER REVISED: 2018-10-31
PAPER ACCEPTED: 2018-11-16
PUBLISHED ONLINE: 2018-12-16
DOI REFERENCE: https://doi.org/10.2298/TSCI180915335I
CITATION EXPORT: view in browser or download as text file
THERMAL SCIENCE YEAR 2019, VOLUME 23, ISSUE Supplement 1, PAGES [S113 - S120]
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© 2019 Society of Thermal Engineers of Serbia. Published by the Vinča Institute of Nuclear Sciences, Belgrade, Serbia. This article is an open access article distributed under the terms and conditions of the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International licence