Related papers: Trends and Risk Premia: Update and Additional Plot…
We check the claims that data from Google Trends contain enough data to predict future financial index returns. We first discuss the many subtle (and less subtle) biases that may affect the backtest of a trading strategy, particularly when…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
This paper develops an axiomatic framework for ranking metrics, a general class of functionals for evaluating and ordering financial or insurance positions. Unlike traditional risk-adjusted performance measures-such as the Sharpe ratio,…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…
In the theory of financial markets, a stylized fact is a qualitative summary of a pattern in financial market data that is observed across multiple assets, asset classes and time horizons. In this article, we test a set of eleven stylized…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…
We show how bad and good volatility propagate through forex markets, i.e., we provide evidence for asymmetric volatility connectedness on forex markets. Using high-frequency, intra-day data of the most actively traded currencies over 2007 -…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…
This paper studies robust forward investment and consumption preferences within a zero-volatility context. Different from previous works, we consider an incomplete financial market model due to general investment portfolio constraints. We…
We consider a portfolio allocation problem for trend following (TF) strategies on multiple correlated assets. Under simplifying assumptions of a Gaussian market and linear TF strategies, we derive analytical formulas for the mean and…
The research presented in this work is motivated by some recent papers regarding hedging and valuation of financial securities subject to funding costs, collateralization and counterparty credit risk. Our goal is to provide a sound…
We show that recent stock market fluctuations are characterized by the cumulative distributions whose tails on short, minute time scales exhibit power scaling with the scaling index alpha > 3 and this index tends to increase quickly with…
We study the interaction between strategy, heterogeneity and growth in a two-agent model of capital accumulation. Preferences are represented by recursive utility functions with decreasing marginal impatience. The stationary equilibria of…
The methodology presented provides a quantitative way to characterize investor behavior and price dynamics within a particular asset class and time period. The methodology is applied to a data set consisting of over 250,000 data points of…
Despite decades of research in risk management, most of the literature has focused on scalar risk measures (like e.g. Value-at-Risk and Expected Shortfall). While such scalar measures provide compact and tractable summaries, they provide a…
We examine some distributions used extensively within the model-based clustering literature in recent years, paying special attention to} claims that have been made about their relative efficacy. Theoretical arguments are provided as well…
In this paper we focus on the beneficial role of random strategies in social sciences by means of simple mathematical and computational models. We briefly review recent results obtained by two of us in previous contributions for the case of…