Related papers: Leverage efficiency
In this paper, we explore some stylized facts of the Bitcoin market using the BTC-USD exchange rate time series of historical intraday data from 2013 to 2020. Bitcoin presents some very peculiar idiosyncrasies, like the absence of…
We consider a game-theoretic model of a market where investors compete for payoffs yielded by several assets. The main result consists in a proof of the existence and uniqueness of a strategy, called relative growth optimal, such that the…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
We study a problem of finding an optimal stopping strategy to liquidate an asset with unknown drift. Taking a Bayesian approach, we model the initial beliefs of an individual about the drift parameter by allowing an arbitrary probability…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
The question addressed in this paper is the performance of the optimal strategy, and the impact of partial information. The setting we consider is that of a stochastic asset price model where the trend follows an unobservable…
Volatility, as a primary indicator of financial risk, forms the foundation of classical frameworks such as Markowitz's Portfolio Theory and the Efficient Market Hypothesis (EMH). However, its conventional use rests on assumptions-most…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
This study examines the weak form of the efficient market hypothesis for Bitcoin using a feedforward neural network. Due to the increasing popularity of cryptocurrencies in recent years, the question has arisen, as to whether market…
Although the threshold network is one of the most used tools to characterize the underlying structure of a stock market, the identification of the optimal threshold to construct a reliable stock network remains challenging. In this paper,…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…
We characterize profit-maximizing operating strategies, over some time horizon [0,T], for an energy store which is trading in an arbitrage market. Our theory allows for leakage, operating inefficiencies, operating constraints and general…
We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…
In this paper, we study a stochastic optimal control problem with stochastic volatility. We prove the sufficient and necessary maximum principle for the proposed problem. Then we apply the results to solve an investment, consumption and…
We consider an investor who is dynamically informed about the future evolution of one of the independent Brownian motions driving a stock's price fluctuations. With linear temporary price impact the resulting optimal investment problem with…
The aim of this short note is to establish a limit theorem for the optimal trading strategies in the setup of the utility maximization problem with proportional transaction costs. This limit theorem resolves the open question from [4]. The…
We demonstrate that learning procedures that rely on aggregated labels, e.g., label information distilled from noisy responses, enjoy robustness properties impossible without data cleaning. This robustness appears in several ways. In the…
This paper establishes a stochastic maximum principle for optimal control problems governed by time-changed forward-backward stochastic differential equations with L\'evy noise. The system incorporates a random, non-decreasing operational…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
This paper studies a continuous-time optimal portfolio selection problem in the complete market for a behavioral investor whose preference is of the prospect type with probability distortion. The investor concerns about the terminal…