Applications of Entropy in Finance: A Review

Entropy

Rongxi Zhou¹  Ru Cai¹ 

[1] School of Economics and Management, Beijing University of Chemical Technology, Beijing 100029, China;

关键词: entropy;    finance;    the principle of maximum entropy;    applications;    portfolio selection;    asset pricing;   

DOI  :  10.3390/e15114909

来源: mdpi

【 摘 要 】

Although the concept of entropy is originated from thermodynamics, its concepts and relevant principles, especially the principles of maximum entropy and minimum cross-entropy, have been extensively applied in finance. In this paper, we review the concepts and principles of entropy, as well as their applications in the field of finance, especially in portfolio selection and asset pricing. Furthermore, we review the effects of the applications of entropy and compare them with other traditional and new methods.

【 授权许可】

CC BY   
© 2013 by the authors; licensee MDPI, Basel, Switzerland.