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Being able to predict the occurrence of extreme returns is important in financial risk management. Using the distribution of recurrence intervals---the waiting time between consecutive extremes---we show that these extreme returns are…
There is an important literature focused on profit warnings and its impact on stock returns. We provide evidence from Moroccan stock market which aims to become an African financial hub. Despite this practical improvement, academic…
Many studies assume stock prices follow a random process known as geometric Brownian motion. Although approximately correct, this model fails to explain the frequent occurrence of extreme price movements, such as stock market crashes. Using…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
In optimization problems, the quality of a candidate solution can be characterized by the optimality gap. For most stochastic optimization problems, this gap must be statistically estimated. We show that for risk-averse problems, standard…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in…
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…
This paper examines an optimal investment problem in a continuous-time (essentially) complete financial market with a finite horizon. We deal with an investor who behaves consistently with principles of Cumulative Prospect Theory, and whose…
This thesis mainly focuses on two problems in capital structure and individual's life-cycle portfolio choice. In the first problem, we derive a stochastic control model to optimize banks' dividend and recapitalization policies and calibrate…
In this article we model chaotic dynamics in financial markets by treating the market price, and market makers' inventory, as anharmonic oscillators with a nonlinear coupling. The market makers' risk appetite being the key parameter that…
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…
The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems - and financial markets in particular - that are as predictive as…
Modeling the purposeful behavior of imperfect agents from a small number of observations is a challenging task. When restricted to the single-agent decision-theoretic setting, inverse optimal control techniques assume that observed behavior…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
"What are the origins of risks?" and "How material are they?" -- these are the two most fundamental questions of any risk analysis. Quantitative Structuring -- a technology for building financial products -- provides economically meaningful…
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…
We study the cross-correlation matrix $C_{ij}$ of inventory variations of the most active individual and institutional investors in an emerging market to understand the dynamics of inventory variations. We find that the distribution of…
The world's stock markets display a decades-long pattern of overnight and intraday returns seemingly consistent with only one explanation: one or more large, long-lived quant firms tending to expand its portfolio early in the day (when its…
This paper proposes an expected multivariate utility analysis for ESG investors in which green stocks, brown stocks, and a market index are modeled in a one-factor, CAPM-type structure. This setting allows investors to accommodate their…