We clarify that the widely used estimation method for the LOT liquidity model in the market microstructure literature is improper in the sense of econometric inference. Based on an extensive simulation study and a real data analysis, we show that this method not only overestimates the true...

The nearest correlation matrix problem is to find a valid (positive semidefinite) correlation matrix, R(m,m), that is nearest to a given invalid (non-positive semidefinite) or pseudo-correlation matrix, Q(m,m); m larger than 2. In the literature on this problem, 'nearest' is invariably defined...

Metaheuristics have shown promising performance in solving various deterministic optimization problems, but their performance may deteriorate drastically when tackling problems containing stochastic multiple objectives that should be optimized simultaneously. In recent years, a large amount of...

We test whether the Nelson and Siegel (1987) yield curve model is arbitrage-free in a statistical sense. Theoretically, the Nelson-Siegel model does not ensure the absence of arbitrage opportunities, as shown by Bjork and Christensen (1999). Still, central banks and public wealth managers rely...

This paper presents a heuristic mathematical model of the evolution over time in the statistical distribution of well-being of individuals in a society. The model predicts that when individuals overvalue the more overtly conspicuous aspects of well-being in their lifestyle choices, then the...