Realized Probability

Haibin XIE; Jingjie ZHANG; Yun CHEN; Zudi LU

doi:10.1007/s11424-025-3179-7

Realized Probability

Haibin XIE^*, Jingjie ZHANG, Yun CHEN , Zudi LU

^*Corresponding author for this work

Research output: Journal Publications and Reviews › RGC 21 - Publication in refereed journal › peer-review

Abstract

Under the assumption that asset prices follow a mixed gamma process, this paper first shows that return series can be presented as a difference of two gamma processes and then proposes a realized probability index for return direction forecasting. The underlying distribution of this new index is analyzed and found to be beta-distributed. Both theoretical and empirical results show that this new index is more efficient than the traditional binary index. ©The Editorial Office of JSSC & Springer-Verlag GmbH Germany 2025

Original language	English
Pages (from-to)	1648-1658
Number of pages	11
Journal	Journal of Systems Science and Complexity
Volume	38
Issue number	4
Online published	3 Jul 2025
DOIs	https://doi.org/10.1007/s11424-025-3179-7
Publication status	Published - Aug 2025
Externally published	Yes

Funding

This research was supported by the National Natural Science Foundation of China under Grant Nos. 72271055 and 12201113.

Research Keywords

Beta distribution
mixed Gamma process
realized probability
return decomposition

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abstract = "Under the assumption that asset prices follow a mixed gamma process, this paper first shows that return series can be presented as a difference of two gamma processes and then proposes a realized probability index for return direction forecasting. The underlying distribution of this new index is analyzed and found to be beta-distributed. Both theoretical and empirical results show that this new index is more efficient than the traditional binary index. {\textcopyright}The Editorial Office of JSSC & Springer-Verlag GmbH Germany 2025",

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AU - XIE, Haibin

AU - ZHANG, Jingjie

AU - CHEN , Yun

AU - LU, Zudi

PY - 2025/8

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N2 - Under the assumption that asset prices follow a mixed gamma process, this paper first shows that return series can be presented as a difference of two gamma processes and then proposes a realized probability index for return direction forecasting. The underlying distribution of this new index is analyzed and found to be beta-distributed. Both theoretical and empirical results show that this new index is more efficient than the traditional binary index. ©The Editorial Office of JSSC & Springer-Verlag GmbH Germany 2025

AB - Under the assumption that asset prices follow a mixed gamma process, this paper first shows that return series can be presented as a difference of two gamma processes and then proposes a realized probability index for return direction forecasting. The underlying distribution of this new index is analyzed and found to be beta-distributed. Both theoretical and empirical results show that this new index is more efficient than the traditional binary index. ©The Editorial Office of JSSC & Springer-Verlag GmbH Germany 2025

KW - Beta distribution

KW - mixed Gamma process

KW - realized probability

KW - return decomposition

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SP - 1648

EP - 1658

JO - Journal of Systems Science and Complexity

JF - Journal of Systems Science and Complexity

IS - 4

ER -

Realized Probability

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