Quantitative Finance
Black-Scholes implied volatility is a quantile. The insight follows from the normalized option price being a probability on the variance scale, with the inverse Gaussian distribution providing the link. It enables analytically exact and…
Daily Value-at-Risk (VaR) for option books requires more than an accurate quantile forecast. It first requires a precise definition of the loss target. Before any model is evaluated, the protocol must fix the book construction rule, the…
Large language models (LLMs) have shown promise in translating model-based explanations into human-readable narratives. This study evaluates whether LLMs can serve as post-hoc explainability interfaces for credit risk models, focusing on…
This paper examines how the Shanghai-Hong Kong Stock Connect (SHHK Stock Connect) affects the A-H share price premium and whether the policy effect depends on pre-existing market efficiency. Using monthly data for 67 A-H dual-listed firms…
Financial markets are noisy and non-stationary, making alpha mining highly sensitive to backtest noise and regime shifts. While recent agentic frameworks improve automation, they often lack controllable multi-round search and reliable reuse…
Standard real options theory predicts delay in exercising the option to invest or deploy when extreme asset volatility or technological uncertainty are present. However, in the current race to develop artificial general intelligence (AGI),…
Built to generalise classical stochastic calculus, rough path theory provides a natural and pathwise framework to model continuous non-semimartingale assets. This paper investigates the capacity of this framework to support frictionless…
We study optimal execution in markets with transient price impact in a competitive setting with $N$ traders. Motivated by prior negative results on the existence of pure Nash equilibria, we consider randomized strategies for the traders and…
Monotone mean-variance (MMV) utility is the minimal modification of the classical Markowitz utility that respects rational ordering of investment opportunities. This paper provides, for the first time, a complete characterization of optimal…
We study $N$-player optimal execution games in an Obizhaeva--Wang model of transient price impact. When the game is regularized by an instantaneous cost on the trading rate, a unique equilibrium exists and we derive its closed form. Whereas…
This paper distinguishes between risk resonance and risk diversification relationships in the cryptocurrency market based on the newly developed asymmetric breakpoint approach, and analyzes the risk propagation mechanism among…
Motivated by empirical evidence from the joint behavior of realized volatility time series, we propose to model the joint dynamics of log-volatilities using a multivariate fractional Ornstein-Uhlenbeck process. This model is a multivariate…
We study optimal payoff choice for an expected utility maximizer under the constraint that their payoff is not allowed to deviate ``too much'' from a given benchmark. We solve this problem when the deviation is assessed via a…
Classical finance models are based on the premise that investors act rationally and utilize all available information when making portfolio decisions. However, these models often fail to capture the anomalies observed in intertemporal…
We associate to a decorated liability network a liability sheaf on a directed hypergraph whose hyperedges separate the distribution of payments from the collection of receipts. Clearing configurations are precisely the global sections of…
In this article we model chaotic dynamics in financial markets by treating the market price, and market makers' inventory, as anharmonic oscillators with a nonlinear coupling. The market makers' risk appetite being the key parameter that…
Financial markets such as bond, derivatives, and repo markets form networks of interdependent obligations. Existing multilateral netting methods typically trade off the extent of netting against preservation of counterparty exposure:…
In this work, we introduce amortizing perpetual options (AmPOs), a fungible variant of continuous-installment options suitable for exchange-based trading. Traditional installment options lapse when holders cease their payments, destroying…
Generating realistic synthetic option prices requires implied volatility as an input, yet implied volatility is itself derived from observed option prices, creating a circular dependency that limits synthetic data for machine-learning and…
This paper investigates optimal investment and pension policies in a Pay-As-You-Go (PAYG) system supplemented by a buffer fund used as an intergenerational risk-sharing mechanism. The social planner's preference criterion is represented by…