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While Indices, Index tracking funds and ETFs have grown in popularity during then last ten years, there are many structural problems inherent in Index calculation methodologies and the legal/economic structure of ETFs. These problems raise…
The efficiency of a modern economy depends on what we call the Value-Tracking Hypothesis: that market prices of key assets broadly track some underlying value. This can be expected if a sufficient weight of market participants are…
This paper analyzes the robust long-term growth rate of expected utility and expected return from holding a leveraged exchange-traded fund (LETF). When the Markovian model parameters in the reference asset are uncertain, the robust…
Many active funds hold concentrated portfolios. Flow-driven trading in these securities causes price pressure, which pushes up the funds' existing positions resulting in realized returns. We decompose fund returns into a price pressure…
Cryptocoins (i.e., Bitcoin, Ether, Litecoin) are tradable digital assets. Ownerships of cryptocoins are registered on distributed ledgers (i.e., blockchains). Secure encryption techniques guarantee the security of the transactions…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
Lead-lag relationships, integral to market dynamics, offer valuable insights into the trading behavior of high-frequency traders (HFTs) and the flow of information at a granular level. This paper investigates the lead-lag relationships…
Lead/lag relationships are an important stylized fact at high frequency. Some assets follow the path of others with a small time lag. We provide indicators to measure this phenomenon using tick-by-tick data. Strongly asymmetric…
Daily ETF risk monitoring can become unreliable when market data quality degrades, market conditions shift, or predictive performance becomes unstable. This paper develops a reliability-aware risk monitoring service for next-day tail-risk…
The performance of trend following strategies can be ascribed to the difference between long-term and short-term realized variance. We revisit this general result and show that it holds for various definitions of trend strategies. This…
Commodity futures constitute an attractive asset class for portfolio managers. Propelled by their low correlation with other assets, commodities begin gaining popularity among investors, as they allow to capture diversification benefits.…
Trading and investing in stocks for some is their full-time career, while for others, it's simply a supplementary income stream. Universal among all investors is the desire to turn a profit. The key to achieving this goal is…
We propose a comprehensive treatment of the leverage effect, i.e. the relationship between returns and volatility of a specific asset, focusing on energy commodities futures, namely Brent and WTI crude oils, natural gas and heating oil.…
High-speed computerized trading, often called "high-frequency trading" (HFT), has increased dramatically in financial markets over the last decade. In the US and Europe, it now accounts for nearly one-half of all trades. Although evidence…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds…
Mid-term electricity load forecasting (LF) plays a critical role in power system planning and operation. To address the issue of error accumulation and transfer during the operation of existing LF models, a novel model called error…
The leverage effect refers to the well-established relationship between returns and volatility. When returns fall, volatility increases. We examine the role of the leverage effect with regards to generating density forecasts of equity…
We develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
This paper investigates how realized and option implied volatilities are related to the future quantiles of commodity returns. Whereas realized volatility measures ex-post uncertainty, volatility implied by option prices reveals the…