Related papers: Dynamics of observables in rank-based models and p…
Quantitative trading strategies rely on accurately ranking stocks to identify profitable investments. Effective portfolio management requires models that can reliably order future stock returns. Transformer models are promising for…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
Biondi et al. (2012) develop an analytical model to examine the emergent dynamic properties of share market price formation over time, capable to capture important stylized facts. These latter properties prove to be sensitive to regulatory…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…
Fundamental variables in financial market are not only price and return but a very important role is also played by trading volumes. Here we propose a new multivariate model that takes into account price returns, logarithmic variation of…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
Behavioural finance offers a valuable framework for examining foreign exchange (FX) market dynamics, including puzzles such as excess volatility and fat-tailed distributions. Yet, when it comes to their interaction with the `real' side of…
The present article explores the application of randomized control techniques in empirical asset pricing and performance evaluation. It introduces geometric random walks, a class of Markov chain Monte Carlo methods, to construct flexible…
This paper suggests that business cycles may be a manifestation of coupled real economy and stock market dynamics and describes a mechanism that can generate economic fluctuations consistent with observed business cycles. To this end, we…
Almost twenty years ago, E.R. Fernholz introduced portfolio generating functions which can be used to construct a variety of portfolios, solely in the terms of the individual companies' market weights. I. Karatzas and J. Ruf recently…
Studies conducted on financial market prediction lack a comprehensive feature set that can carry a broad range of contributing factors; therefore, leading to imprecise results. Furthermore, while cooperating with the most recent innovations…
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
This paper investigates the so-called leakage effect of trading strategies generated functionally from rank-dependent portfolio generating functions. This effect measures the loss in wealth of trading strategies due to renewing the…
We address a portfolio selection problem that combines active (outperformance) and passive (tracking) objectives using techniques from convex analysis. We assume a general semimartingale market model where the assets' growth rate processes…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
In this study, MLP models with dynamic structure are applied to factor models for asset pricing tasks. Concretely, the MLP pyramid model structure was employed on firm-characteristic-sorted portfolio factors for modelling the large-capital…
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,…
In the framework of stochastic portfolio theory we introduce rank volatility stabilized models for large equity markets over long time horizons. These models are rank-based extensions of the volatility stabilized models introduced by…
Functional portfolio generation, initiated by E.R. Fernholz almost twenty years ago, is a methodology for constructing trading strategies with controlled behavior. It is based on very weak and descriptive assumptions on the covariation…
We introduce polynomial processes in the sense of [8] in the context of stochastic portfolio theory to model simultaneously companies' market capitalizations and the corresponding market weights. These models substantially extend volatility…