Related papers: The non-linear trade-off between return and risk: …
When individuals interact in groups, the evolution of cooperation is traditionally modeled using the framework of public goods games. These models often assume that the return of the public good depends linearly on the fraction of…
Investment style groups investment approaches to predict portfolio return variations. This study examines the relationship between investment style, style consistency, and risk-adjusted returns of Indian equity mutual funds. The methodology…
The use of factor stochastic volatility models requires choosing the number of latent factors used to describe the dynamics of the financial returns process; however, empirical evidence suggests that the number and makeup of pertinent…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
In recent years, multi-factor strategies have gained increasing popularity in the financial industry, as they allow investors to have a better understanding of the risk drivers underlying their portfolios. Moreover, such strategies promise…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
A risk-averse agent hedges her exposure to a non-tradable risk factor $U$ using a correlated traded asset $S$ and accounts for the impact of her trades on both factors. The effect of the agent's trades on $U$ is referred to as cross-impact.…
This paper proposes a portfolio construction framework designed to remain robust under estimation error, non-stationarity, and realistic trading constraints. The methodology combines dynamic asset eligibility, deterministic rebalancing, and…
We study the continuous time Kyle-Back model with a risk averse informed trader.We show that in a market with multiple assets and non-Gaussian prices an equilibrium exists. The equilibrium is constructed by considering a Fokker-Planck…
In this paper we briefly review the recently inrtroduced Multifractal Random Walk (MRW) that is able to reproduce most of recent empirical findings concerning financial time-series : no correlation between price variations, long-range…
We consider a threshold factor model for high-dimensional time series in which the dynamics of the time series is assumed to switch between different regimes according to the value of a threshold variable. This is an extension of threshold…
We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the…
The main goal of this paper is an application of Bayesian inference in testing the relation between risk and return on the financial instruments. On the basis of the Intertemporal CAPM model we built a general sampling model suitable in…
This note explores the consequences of nonlinear price impact functions on price dynamics within the chartist-fundamentalist framework. Price impact functions may be nonlinear with respect to trading volume. As indicated by recent empirical…
Approving and assessing new drugs is complex because multiple criteria must be considered simultaneously. A common approach is benefit-risk analysis, often conducted within a Bayesian framework to account for uncertainty and combine data…
We analyze correlations among stock returns via a series of widely adopted parameters which we refer to as explanatory variables. We subsequently exploit the results to propose a long only quantitative adaptive technique to construct a…
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
Accurate volatility forecasts are vital in modern finance for risk management, portfolio allocation, and strategic decision-making. However, existing methods face key limitations. Fully multivariate models, while comprehensive, are…
We uncover a close link between outside options and risk attitude: when a decision-maker gains access to an outside option, her behaviour becomes less risk-averse, and conversely, any observed decrease of risk-aversion can be explained by…
We implement momentum strategies using reward-risk measures as ranking criteria based on classical tempered stable distribution. Performances and risk characteristics for the alternative portfolios are obtained in various asset classes and…