Lyapunov Hodrick-Prescott Oscillator w/ DSL [Loxx]

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Lyapunov Hodrick-Prescott Oscillator w/ DSL is a Hodrick-Prescott Channel Filter that is modified using the Lyapunov stability algorithm to turn the filter into an oscillator. Signals are created using Discontinued Signal Lines.

What is the Lyapunov Stability?
As soon as scientists realized that the evolution of physical systems can be described in terms of mathematical equations, the stability of the various dynamical regimes was recognized as a matter of primary importance. The interest for this question was not only motivated by general curiosity, but also by the need to know, in the XIX century, to what extent the behavior of suitable mechanical devices remains unchanged, once their configuration has been perturbed. As a result, illustrious scientists such as Lagrange, Poisson, Maxwell and others deeply thought about ways of quantifying the stability both in general and specific contexts. The first exact definition of stability was given by the Russian mathematician Aleksandr Lyapunov who addressed the problem in his PhD Thesis in 1892, where he introduced two methods, the first of which is based on the linearization of the equations of motion and has originated what has later been termed Lyapunov exponents (LE). (Lyapunov 1992)

The interest in it suddenly skyrocketed during the Cold War period when the so-called "Second Method of Lyapunov" (see below) was found to be applicable to the stability of aerospace guidance systems which typically contain strong nonlinearities not treatable by other methods. A large number of publications appeared then and since in the control and systems literature. More recently the concept of the Lyapunov exponent (related to Lyapunov's First Method of discussing stability) has received wide interest in connection with chaos theory. Lyapunov stability methods have also been applied to finding equilibrium solutions in traffic assignment problems.

In practice, Lyapunov exponents can be computed by exploiting the natural tendency of an n-dimensional volume to align along the n most expanding subspace. From the expansion rate of an n-dimensional volume, one obtains the sum of the n largest Lyapunov exponents. Altogether, the procedure requires evolving n linearly independent perturbations and one is faced with the problem that all vectors tend to align along the same direction. However, as shown in the late '70s, this numerical instability can be counterbalanced by orthonormalizing the vectors with the help of the Gram-Schmidt procedure (Benettin et al. 1980, Shimada and Nagashima 1979) (or, equivalently with a QR decomposition). As a result, the LE λi, naturally ordered from the largest to the most negative one, can be computed: they are altogether referred to as the Lyapunov spectrum.

The Lyapunov exponent "λ" , is useful for distinguishing among the various types of orbits. It works for discrete as well as continuous systems.

λ < 0
The orbit attracts to a stable fixed point or stable periodic orbit. Negative Lyapunov exponents are characteristic of dissipative or non-conservative systems (the damped harmonic oscillator for instance). Such systems exhibit asymptotic stability; the more negative the exponent, the greater the stability. Superstable fixed points and superstable periodic points have a Lyapunov exponent of λ = −∞. This is something akin to a critically damped oscillator in that the system heads towards its equilibrium point as quickly as possible.

λ = 0
The orbit is a neutral fixed point (or an eventually fixed point). A Lyapunov exponent of zero indicates that the system is in some sort of steady state mode. A physical system with this exponent is conservative. Such systems exhibit Lyapunov stability. Take the case of two identical simple harmonic oscillators with different amplitudes. Because the frequency is independent of the amplitude, a phase portrait of the two oscillators would be a pair of concentric circles. The orbits in this situation would maintain a constant separation, like two flecks of dust fixed in place on a rotating record.

λ > 0
The orbit is unstable and chaotic. Nearby points, no matter how close, will diverge to any arbitrary separation. All neighborhoods in the phase space will eventually be visited. These points are said to be unstable. For a discrete system, the orbits will look like snow on a television set. This does not preclude any organization as a pattern may emerge. Thus the snow may be a bit lumpy. For a continuous system, the phase space would be a tangled sea of wavy lines like a pot of spaghetti. A physical example can be found in Brownian motion. Although the system is deterministic, there is no order to the orbit that ensues.

For our purposes here, we transform the HP by applying Lyapunov Stability as follows:

output = math.log(math.abs(HP / HP))

You can read more about Lyapunov Stability here: Measuring Chaos

What is. the Hodrick-Prescott Filter?
The Hodrick-Prescott (HP) filter refers to a data-smoothing technique. The HP filter is commonly applied during analysis to remove short-term fluctuations associated with the business cycle. Removal of these short-term fluctuations reveals long-term trends.

The Hodrick-Prescott (HP) filter is a tool commonly used in macroeconomics. It is named after economists Robert Hodrick and Edward Prescott who first popularized this filter in economics in the 1990s. Hodrick was an economist who specialized in international finance. Prescott won the Nobel Memorial Prize, sharing it with another economist for their research in macroeconomics.

This filter determines the long-term trend of a time series by discounting the importance of short-term price fluctuations. In practice, the filter is used to smooth and detrend the Conference Board's Help Wanted Index (HWI) so it can be benchmarked against the Bureau of Labor Statistic's (BLS) JOLTS, an economic data series that may more accurately measure job vacancies in the U.S.

The HP filter is one of the most widely used tools in macroeconomic analysis. It tends to have favorable results if the noise is distributed normally, and when the analysis being conducted is historical.

What are DSL Discontinued Signal Line?
A lot of indicators are using signal lines in order to determine the trend (or some desired state of the indicator) easier. The idea of the signal line is easy : comparing the value to it's smoothed (slightly lagging) state, the idea of current momentum/state is made.

Discontinued signal line is inheriting that simple signal line idea and it is extending it : instead of having one signal line, more lines depending on the current value of the indicator.

"Signal" line is calculated the following way :

When a certain level is crossed into the desired direction, the EMA of that value is calculated for the desired signal line
When that level is crossed into the opposite direction, the previous "signal" line value is simply "inherited" and it becomes a kind of a level

This way it becomes a combination of signal lines and levels that are trying to combine both the good from both methods.

In simple terms, DSL uses the concept of a signal line and betters it by inheriting the previous signal line's value & makes it a level.

  • Bar coloring
  • Alerts
  • Signals
  • Loxx's Expanded Source Types
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