Article
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A New Measure of Risk Using Fourier Analysis
Version 1
: Received: 21 August 2024 / Approved: 22 August 2024 / Online: 23 August 2024 (11:13:24 CEST)
How to cite: Grabinski, M.; Klinkova, G. A New Measure of Risk Using Fourier Analysis. Preprints 2024, 2024081680. https://doi.org/10.20944/preprints202408.1680.v1 Grabinski, M.; Klinkova, G. A New Measure of Risk Using Fourier Analysis. Preprints 2024, 2024081680. https://doi.org/10.20944/preprints202408.1680.v1
Abstract
We use Fourier analysis to access risk in financial products. With it we analyze price changes of e.g. stocks. Via Fourier analysis we scrutinize quantitatively whether the frequency of change is higher than a change in (conserved) company value would allow. If it is the case, it would be a clear indicator of speculation and with it risk. The entire methods or better its application is fairly new. However, there were severe flaws in previous attempts; making the results (not the method) doubtful. We corrected all these mistakes by e.g. using Fourier transformation instead of discrete Fourier analysis. Our analysis is reliable in the entire frequency band, even for frequency of 1/1d or higher if the prices are noted accordingly. For the stocks scrutinized we found that the price of stocks changes disproportionally within one week which clearly indicates speculation. It would be an interesting extension to apply the method to crypto currencies as these currencies have no conserved value which makes normal considerations of volatility difficult.
Keywords
finance; risk; Fourier; crypto currencies; stock market; conserved value
Subject
Business, Economics and Management, Finance
Copyright: This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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