Related papers: The non-linear trade-off between return and risk: …
The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social…
By capturing outliers, volatility clustering, and tail dependence in the asset return distribution, we build a sophisticated model to predict the downside risk of the global financial market. We further develop a dynamic regime switching…
Value-at-Risk and its conditional allegory, which takes into account the available information about the economic environment, form the centrepiece of the Basel framework for the evaluation of market risk in the banking sector. In this…
For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…
Motivated by practical applications, we explore the constrained multi-period mean-variance portfolio selection problem within a market characterized by a dynamic factor model. This model captures predictability in asset returns driven by…
We introduce a class of dependence structures, that we call the Multiple Risk Factor (MRF) dependence structures. On the one hand, the new constructions extend the popular CreditRisk+ approach, and as such they formally describe default…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
We model investor heterogeneity using different required returns on an investment and evaluate the impact on the valuation of an investment. By assuming no disagreement on the cash flows, we emphasize how risk preferences in particular, but…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
We demonstrate using multi-layered networks, the existence of an empirical linkage between the dynamics of the financial network constructed from the market indices and the macroeconomic networks constructed from macroeconomic variables…
We use the P&L on a particular class of swaps, representing variance and higher moments for log returns, as estimators in our empirical study on the S&P500 that investigates the factors determining variance and higher-moment risk premia.…
Correlations between random variables play an important role in applications, e.g.\ in financial analysis. More precisely, accurate estimates of the correlation between financial returns are crucial in portfolio management. In particular,…
We reverse-engineer the equilibrium construction process of asset prices in order to obtain returns which depend on firm characteristics, possibly in a linear fashion. One key requirement is that agents must have demands that rely…
Time series momentum strategies are widely applied in the quantitative financial industry and its academic research has grown rapidly since the work of Moskowitz, Ooi and Pedersen (2012). However, trading signals are usually obtained via…
The scaling properties of the time series of asset prices and trading volumes of stock markets are analysed. It is shown that similarly to the asset prices, the trading volume data obey multi-scaling length-distribution of low-variability…
The dynamics of the equal-time cross-correlation matrix of multivariate financial time series is explored by examination of the eigenvalue spectrum over sliding time windows. Empirical results for the S&P 500 and the Dow Jones Euro Stoxx 50…
This paper investigates the risk-return relationship in determination of housing asset pricing. In so doing, the paper evaluates behavioral hypotheses advanced by Case and Shiller (1988, 2002, 2009) in studies of boom and post-boom housing…
Global fixed income returns span across multiple maturities and economies, that is, they naturally reside on multi-dimensional data structures referred to as tensors. In contrast to standard "flat-view" multivariate models that are agnostic…
In this paper, both dynamic mean-variance portfolio selection problems and dynamic variance hedging problems are discussed under non-Markovian framework. Explicit closed-loop equilibrium strategies of these problems are respectively…
Adaptive populations such as those in financial markets and distributed control can be modeled by the Minority Game. We consider how their dynamics depends on the agents' initial preferences of strategies, when the agents use linear or…