Related papers: Time-Consistent and Market-Consistent Evaluations
Estimation of the covariance matrix of asset returns is crucial to portfolio construction. As suggested by economic theories, the correlation structure among assets differs between emerging markets and developed countries. It is therefore…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
We introduce two types of estimators of the finite-dimensional parameters in the case of observations of inhomogeneous Poisson processes. These are the estimators of the method of moments and multi-step MLE. It is shown that the estimators…
Markov decision processes are useful models of concurrency optimisation problems, but are often intractable for exhaustive verification methods. Recent work has introduced lightweight approximative techniques that sample directly from…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
We provide efficient estimation methods for first- and second-price auctions under independent (asymmetric) private values and partial observability. Given a finite set of observations, each comprising the identity of the winner and the…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
We consider asset price models whose dynamics are described by linear functions of the (time extended) signature of a primary underlying process, which can range from a (market-inferred) Brownian motion to a general multidimensional…
The aim of this paper is to compare two asset allocation methods for a pension scheme during the decumulation phase in the simplified portfolio selection between a risky asset following a geometric Brownian motion and a riskless asset. The…
Stock market returns are typically analyzed using standard regression, yet they reside on irregular domains which is a natural scenario for graph signal processing. To this end, we consider a market graph as an intuitive way to represent…
The challenge of CPU evaluation lies in the fact that user-perceived performance metrics can only be measured on an independently running system consisting of the CPU and other indispensable components, and hence it is difficult to…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
For many financial applications, it is important to have reliable and tractable models for the behavior of assets and indexes, for example in risk evaluation. A successful approach is based on ARCH processes, which strike the right balance…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…