Related papers: Time-Consistent and Market-Consistent Evaluations
In this paper we present results on scalar risk measures in markets with transaction costs. Such risk measures are defined as the minimal capital requirements in the cash asset. First, some results are provided on the dual representation of…
Decision markets are mechanisms for selecting one among a set of actions based on forecasts about their consequences. Decision markets that are based on scoring rules have been proven to offer incentive compatibility analogous to properly…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
Precision matrix estimation is a cornerstone concept in statistics, economics, and finance. Despite advances in recent years, estimation methods that are simultaneously (i) dense, (ii) consistent, and (iii) model-free are lacking. While…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
This paper introduces an innovative framework for the periodic evaluation of defined-contribution pension funds. The performance of the pension fund is evaluated not only at retirement, but also within the interim periods. In contrast to…
We suggest an original physical approach to describe the mechanism of market pricing. The core of our approach is to consider pricing at different time scales separately, using independent equations of motion. Such an approach leads to a…
We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…
Extant literature on fair pricing methods for actuarial contexts has primarily focused on the regression setting. While such approaches are well-suited to short-term products, it is unclear how they generalize to long-term products, whose…
We introduce a novel covariance estimator for portfolio selection that adapts to the non-stationary or persistent heteroskedastic environments of financial time series by employing exponentially weighted averages and nonlinearly shrinking…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
The two-trials rule in drug regulation requires statistically significant results from two pivotal trials to demonstrate efficacy. However, it is unclear how the effect estimates from both trials should be combined to quantify the drug…
We simulate a reputation system in a market to optimise the balance between market security and market equity. We introduce a method of using a reputation system that will stabilise the distribution of wealth in a market in a fair manner.…
A multi--state life insurance model is naturally described in terms of the intensity matrix of an underlying (time--inhomogeneous) Markov process which describes the dynamics for the states of an insured person. Between and at transitions,…
We study the allocation of synthetic portfolios under hierarchical nested, one-factor, and diagonal structures of the population covariance matrix in a high-dimensional scenario. The noise reduction approaches for the sample realizations…
Portfolio sorting is ubiquitous in the empirical finance literature, where it has been widely used to identify pricing anomalies. Despite its popularity, little attention has been paid to the statistical properties of the procedure. We…
In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…
We test a historical price time series in a financial market (the NASDAQ 100 index) for a statistical property known as detailed balance. The presence of detailed balance would imply that the market can be modeled by a stochastic process…