Related papers: Deconstructing the Low-Vol Anomaly

We consider a dynamic portfolio optimization problem that incorporates predictable returns, instantaneous transaction costs, price impact, and stochastic volatility, extending the classical results of Garleanu and Pedersen (2013), which…

In this article, we discuss a bivariate distribution whose conditionals are univariate binomial distributions and the marginals are not binomial that exhibits negative correlation. Some useful structural properties of this distribution…

This paper studies the portfolio optimization problem when the investor's utility is general and the return and volatility of the risky asset are fast mean-reverting, which are important to capture the fast-time scale in the modeling of…

We study the loss in objective value when an inaccurate objective is optimized instead of the true one, and show that "on average" this loss is very small, for an arbitrary compact feasible region.

This paper investigates the asymptotic behavior of higher-order conditional tail moments, which quantify the contribution of individual losses in the event of systemic collapse. The study is conducted within a framework comprising two…

Stochastic dominance of a random variable by a convex combination of its independent copies has recently been shown to hold within the relatively narrow class of distributions with concave odds function, and later extended to broader…

It is widely believed that fluctuations in transaction volume, as reflected in the number of transactions and to a lesser extent their size, are the main cause of clustered volatility. Under this view bursts of rapid or slow price diffusion…

Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…

We argue that negative skew and positive mean of the distribution of stock returns are largely due to the broken symmetry of stochastic volatility governing gains and losses. Starting with stochastic differential equations for stock returns…

Our velocity measurements on a quasi-two-dimensional turbulent flow in a rapidly rotating annulus yield an inverse cascade with E(k)~k^{-2} rather than the expected E(k)~k^{-5/3}. The probability distribution functions for longitudinal…

This paper investigates dividend optimization of an insurance corporation under a more realistic model which takes into consideration refinancing or capital injections. The model follows the compound Poisson framework with credit interest…

Motivated by the fact that full diversity order is achieved using the "best-relay" selection technique, we consider opportunistic amplify-and-forward and decode-and-forward relaying systems. We focus on the outage probability of such a…

We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…

Financial time series exhibit two different type of non linear correlations: (i) volatility autocorrelations that have a very long range memory, on the order of years, and (ii) asymmetric return-volatility (or `leverage') correlations that…

A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…

This manuscript provides optimization guarantees, generalization bounds, and statistical consistency results for AdaBoost variants which replace the exponential loss with the logistic and similar losses (specifically, twice differentiable…

Maintaining a competitive edge requires a firm to replace deteriorating business lines with new projects. Accordingly, part of a firm's value resides in its ability to exploit new opportunities. This article incorporates adaptation into…

In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…

In a continuous-time economy, this paper formulates the Epstein-Zin preference for discounted dividends received by an investor as an Epstein-Zin singular control utility. We introduce a backward stochastic differential equation with an…

This paper describes a methodology for detecting anomalies from sequentially observed and potentially noisy data. The proposed approach consists of two main elements: (1) {\em filtering}, or assigning a belief or likelihood to each…