Related papers: Deconstructing the Low-Vol Anomaly
We consider the problem of risk diversification of $\alpha$-stable heavy tailed risks. We study the behaviour of the aggregated Value-at-Risk, with particular reference to the impact of different tail dependence structures on the limits to…
We investigate the impact of big winner stocks on the performance of active and passive investment strategies using a combination of numerical and analytical techniques. Our analysis is based on historical stock price data from 2006 to 2021…
We solve the pricing problem for perpetual American puts and calls on dividend-paying assets. The dependence of a dividend process on the underlying stochastic factor is fairly general: any non-decreasing function is admissible. The…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…
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.…
We study non-convex Hamilton-Jacobi equations in the presence of gradient constraints and produce new, optimal, regularity results for the solutions. A distinctive feature of those equations regards the existence of a lower bound to the…
We show analytically that there is anomalous diffusion when the diffusion constant depends on the concentration as a power law with a positive exponent or a negative exponent with absolute value less than one and the initial condition is a…
We propose a new volatility model based on two stylized facts of the volatility in the stock market: clustering and leverage effect. We calibrate our model parameters, in the leading order, with 77 years Dow Jones Industrial Average data.…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
The quantification of diversification benefits due to risk aggregation plays a prominent role in the (regulatory) capital management of large firms within the financial industry. However, the complexity of today's risk landscape makes a…
We question the existence of one-loop corrections to the large-scale power spectrum from small-scale modes in non-slow-roll dynamics which are not volume suppressed by the ratio of the short to long distance scales. One-loop contributions…
Dynamic pricing models often posit that a $\textbf{stream}$ of customer interactions occur sequentially, where customers' valuations are drawn independently. However, this model is not entirely reflective of the real world, as it overlooks…
We consider a two-dimensional optimal dividend problem in the context of two insurance companies with compound Poisson surplus processes, who collaborate by paying each other's deficit when possible. We solve the stochastic control problem…
We apply the geometric theory of swimming at low Reynolds number to the study of nearly circular swimmers in two-dimensional fluids with non-vanishing Hall, or "odd", viscosity. The Hall viscosity gives an off-diagonal contribution to the…
We present a new volatility model, simple to implement, that includes a leverage effect whose return-volatility correlation function fits to empirical observations. This model is able to capture both the "retarded effect" induced by the…
The coupled nonlinear volatility and option pricing model presented recently by Ivancevic is investigated, which generates a leverage effect, i.e., stock volatility is (negatively) correlated to stock returns, and can be regarded as a…
The leverage effect-- the correlation between an asset's return and its volatility-- has played a key role in forecasting and understanding volatility and risk. While it is a long standing consensus that leverage effects exist and improve…
Methodology that recently lead us to predict to an amazing accuracy the date (July 11, 2008) of reverse of the oil price up trend is briefly summarized and some further aspects of the related oil price dynamics elaborated. This methodology…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
Using a family of modified Weibull distributions, encompassing both sub-exponentials and super-exponentials, to parameterize the marginal distributions of asset returns and their multivariate generalizations with Gaussian copulas, we offer…