Related papers: Foreign exchange risk premia: from traditional to …
We consider a conditional factor model for a multivariate portfolio of United States equities in the context of analysing a statistical arbitrage trading strategy. A state space framework underlies the factor model whereby asset returns are…
In this paper we aim to improve existing empirical exchange rate models by accounting for uncertainty with respect to the underlying structural representation. Within a flexible Bayesian non-linear time series framework, our modeling…
A Bayesian procedure is developed for multivariate stochastic volatility, using state space models. An autoregressive model for the log-returns is employed. We generalize the inverted Wishart distribution to allow for different correlation…
The equity risk premium puzzle is that the return on equities has far exceeded the average return on short-term risk-free debt and cannot be explained by conventional representative-agent consumption based equilibrium models. We review a…
Statistical arbitrage strategies, such as pairs trading and its generalizations, rely on the construction of mean-reverting spreads enjoying a certain degree of predictability. Gaussian linear state-space processes have recently been…
We show that time-dependent fluctuations $\{\Delta x\}$ in foreign exchange rates are accurately described by a random walk in a complex plane that is demarcated into the gain (+) and loss (-) sectors. $\{\Delta x\}$ is the outcome of $N$…
This thesis applies entropy as a model independent measure to address three research questions concerning financial time series. In the first study we apply transfer entropy to drawdowns and drawups in foreign exchange rates, to study their…
Marginal expected shortfall is unquestionably one of the most popular systemic risk measures. Studying its extreme behaviour is particularly relevant for risk protection against severe global financial market downturns. In this context,…
In a dual risk model, the premiums are considered as the costs and the claims are regarded as the profits. The surplus can be interpreted as the wealth of a venture capital, whose profits depend on research and development. In most of the…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
In inference problems involving a multi-dimensional parameter $\theta$, it is often natural to consider decision rules that have a risk which is invariant under some group $G$ of permutations of $\theta$. We show that this implies that the…
$\alpha$-stable distributions are utilised as models for heavy-tailed noise in many areas of statistics, finance and signal processing engineering. However, in general, neither univariate nor multivariate $\alpha$-stable models admit closed…
We evaluate the average waiting time between observing the price of financial markets and the next price change, especially in an on-line foreign exchange trading service for individual customers via the internet. Basic technical idea of…
In this paper, we extend the existing double linear policy by incorporating time-varying weights instead of constant weights and study a certain robustness property, called robust positive expectation (RPE), in a discrete-time setting. We…
In this note we show that the locally stationary wavelet process can be decomposed into a sum of signals, each of which following a moving average process with time-varying parameters. We then show that such moving average processes are…
Temporal-Difference (TD) learning is a general and very useful tool for estimating the value function of a given policy, which in turn is required to find good policies. Generally speaking, TD learning updates states whenever they are…
We develop a penalized two-pass regression with time-varying factor loadings. The penalization in the first pass enforces sparsity for the time-variation drivers while also maintaining compatibility with the no-arbitrage restrictions by…
Metastability is a phenomenon observed in stochastic systems which stay in a false-equilibrium within a region of its state space until the occurrence of a sequence of rare events that leads to an abrupt transition to a different region.…
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…
It is shown that prize changes of the US dollar - German Mark exchange rates upon different delay times can be regarded as a stochastic Marcovian process. Furthermore we show that from the empirical data the Kramers-Moyal coefficients can…