Related papers: Learning, investments and derivatives
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
Systems tend to become more and more complex. This has a direct impact on system engineering processes. Two of the most important phases in these processes are requirements engineering and quality assurance. Two significant complexity…
Derivative pricing is about cash flow discounting at the riskfree rate. This teaching has lost its meaning post the financial crisis, due to the addition of extra value adjustments (XVA), which also made derivatives pricing and valuation a…
We propose a universal end-to-end framework for portfolio optimization where asset distributions are directly obtained. The designed framework circumvents the traditional forecasting step and avoids the estimation of the covariance matrix,…
Real-world large-scale datasets usually contain noisy labels and are imbalanced. Therefore, we propose derivative manipulation (DM), a novel and general example weighting approach for training robust deep models under these adverse…
Modeling seeks to tame complexity during software development, by supporting design, analysis, and stakeholder communication. Paradoxically, experiences made by educators indicate that students often perceive modeling as adding complexity,…
Like with most large-scale systems, the evaluation of quantitative properties of collective adaptive systems is an important issue that crosscuts all its development stages, from design (in the case of engineered systems) to runtime…
Sustainable financial markets play an important role in the functioning of human society. Still, the detection and prediction of risk in financial markets remain challenging and draw much attention from the scientific community. Here we…
The world is changing at an ever-increasing pace. And it has changed in a much more fundamental way than one would think, primarily because it has become more connected and interdependent than in our entire history. Every new product, every…
This chapter does not deal with specific tools and techniques for managing complex systems, but proposes some basic concepts that help us to think and speak about complexity. We review classical thinking and its intrinsic drawbacks when…
As demonstrated during the recent financial crisis, regulators require additional analytical tools to assess systemic risk in the financial sector. This paper describes one such tool; namely a novel market modeling and analysis capability.…
"What are the origins of risks?" and "How material are they?" -- these are the two most fundamental questions of any risk analysis. Quantitative Structuring -- a technology for building financial products -- provides economically meaningful…
In this paper we introduce a novel family of decision lists consisting of highly interpretable models which can be learned efficiently in a greedy manner. The defining property is that all rules are oriented in the same direction.…
Derivative training is an established method that can significantly increase the accuracy of neural networks in certain low-dimensional tasks. In this paper, we extend this improvement to an illustrative image analysis problem:…
We explore the use of deep learning hierarchical models for problems in financial prediction and classification. Financial prediction problems -- such as those presented in designing and pricing securities, constructing portfolios, and risk…
Mathematical modelling is ubiquitous in the financial industry and drives key decision processes. Any given model provides only a crude approximation to reality and the risk of using an inadequate model is hard to detect and quantify. By…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
This paper challenges the use of stocks in portfolio construction, instead we demonstrate that Asian derivatives, straddles, or baskets could be more convenient substitutes. Our results are obtained under the assumptions of the…
Existing procedures for model validation have been deemed inadequate for many engineering systems. The reason of this inadequacy is due to the high degree of complexity of the mechanisms that govern these systems. It is proposed in this…