Quantitative Finance
Predicting corporate default risk has long been a crucial topic in the finance field, as bankruptcies impose enormous costs on market participants as well as the economy as a whole. This paper aims to forecast frailty correlated default…
A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing…
We take inspiration from statistical physics to develop a novel conceptual framework for the analysis of financial markets. We model the order book dynamics as a motion of particles and define the momentum measure of the system as a way to…
Financial time series have historically been assumed to be a martingale process under the Random Walk hypothesis. Instead of making investment decisions using the raw prices alone, various multimodal pattern matching algorithms have been…
Cryptocurrencies have become a popular and widely researched topic of interest in recent years for investors and scholars. In order to make informed investment decisions, it is essential to comprehend the factors that impact cryptocurrency…
We extend recurrent neural networks to include several flexible timescales for each dimension of their output, which mechanically improves their abilities to account for processes with long memory or with highly disparate time scales. We…
Predicting future prices of a stock is an arduous task to perform. However, incorporating additional elements can significantly improve our predictions, rather than relying solely on a stock's historical price data to forecast its future…
Volatility-based trading strategies have attracted a lot of attention in financial markets due to their ability to capture opportunities for profit from market dynamics. In this article, we propose a new volatility-based trading strategy…
By using the Hamiltonian formulation, we demonstrate that the Merton-Garman equation emerges naturally from the Black-Scholes equation after imposing invariance (symmetry) under local (gauge) transformations over changes in the stock price.…
High-frequency quantitative investment is a crucial aspect of stock investment. Notably, order flow data plays a critical role as it provides the most detailed level of information among high-frequency trading data, including comprehensive…
Identifying companies with similar profiles is a core task in finance with a wide range of applications in portfolio construction, asset pricing and risk attribution. When a rigorous definition of similarity is lacking, financial analysts…
Portfolio management is an essential part of investment decision-making. However, traditional methods often fail to deliver reasonable performance. This problem stems from the inability of these methods to account for the unique…
Lending protocols in decentralized finance enable the permissionless exchange of capital from lenders to borrowers without relying on a trusted third party for clearing or market-making. Interest rates are set by the supply and demand of…
We consider the problem of estimating a nested structure of two expectations taking the form $U_0 = E[\max\{U_1(Y), \pi(Y)\}]$, where $U_1(Y) = E[X\ |\ Y]$. Terms of this form arise in financial risk estimation and option pricing. When…
The growing attention on cryptocurrencies has led to increasing research on digital stock markets. Approaches and tools usually applied to characterize standard stocks have been applied to the digital ones. Among these tools is the…
The occurrence of a claim often impacts not one but multiple insurance coverages provided in the contract. To account for this multivariate feature, we propose a new individual claims reserving model built around the activation of the…
The emergence of price comparison websites (PCWs) has presented insurers with unique challenges in formulating effective pricing strategies. Operating on PCWs requires insurers to strike a delicate balance between competitive premiums and…
Mutual fund categorization has become a standard tool for the investment management industry and is extensively used by allocators for portfolio construction and manager selection, as well as by fund managers for peer analysis and…
In this article, we consider the problem of a bank's loan portfolio in the context of liquidity risk, while allowing for the limited liability protection enjoyed by the bank. Accordingly, we construct a novel loan portfolio model with…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…