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This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…
This paper considers a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure, with drifts that are functions of an auxiliary diffusion 'factor' process. The…
Within a financial model with linear price impact, we study the problem of hedging a covered European option under gamma constraint. Using stochastic target and partial differential equation smoothing techniques, we prove that the…
Pearson's correlation coefficient is a popular statistical measure to summarize the strength of association between two continuous variables. It is usually interpreted via its square as percentage of variance of one variable predicted by…
We consider the problem of minimizing capital at risk in the Black-Scholes setting. The portfolio problem is studied given the possibility that a correlation constraint between the portfolio and a financial index is imposed. The optimal…
We propose a regression model for count data when the classical generalized linear model approach is too rigid due to a high outcome of zero counts and a nonlinear influence of continuous covariates. Zero-Inflation is applied to take into…
Recently the interest of researchers has shifted from the analysis of synchronous relationships of financial instruments to the analysis of more meaningful asynchronous relationships. Both of those analyses are concentrated only on…
We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…
We investigate an application of network centrality measures to portfolio optimization, by generalizing the method in [Pozzi, Di Matteo and Aste, \emph{Spread of risks across financial markets: better to invest in the peripheries},…
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward…
We apply a quadratic hedging scheme developed by Foellmer, Schweizer, and Sondermann to European contingent products whose underlying asset is modeled using a GARCH process and show that local risk-minimizing strategies with respect to the…
Stock correlations is crucial to asset pricing, investor decision-making, and financial risk regulations. However, microscopic explanation based on agent-based modeling is still lacking. We here propose a model derived from minority game…
This paper presents an optimal strategy for portfolio liquidation under discrete time conditions. We assume that N risky assets held will be liquidated according to the same time interval and order quantity, and the basic price processes of…
This work seeks to answer key research questions regarding the viability of reinforcement learning over the S&P 500 index. The on-policy techniques of Value Iteration (VI) and State-action-reward-state-action (SARSA) are implemented along…
Correlation clustering is a flexible framework for partitioning data based solely on pairwise similarity or dissimilarity information, without requiring the number of clusters as input. However, in many practical scenarios, these pairwise…
Model fairness is an essential element for Trustworthy AI. While many techniques for model fairness have been proposed, most of them assume that the training and deployment data distributions are identical, which is often not true in…
This paper describes a new method of bond portfolio optimization based on stochastic string models of correlation structure in bond returns. The paper shows how to approximate correlation function of bond returns, compute the optimal…
We maximize the expected utility from terminal wealth for an HARA investor when the market price of risk is an unobservable random variable. We compute the optimal portfolio explicitly and explore the effects of learning by comparing it…
The aim of this paper is twofold. On one hand, we strive to give a simpler proof of the optimality of greedy controls when the cost of interventions is control-affine and the dynamics follow a state-constrained controlled SIR model. This is…
In this paper, we study the martingale property for a Scott correlated stochastic volatility model, when the correlation coefficient between the Brownian motion driving the volatility and the one driving the asset price process is…