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This paper explores the mean-variance portfolio selection problem in a multi-period financial market characterized by regime-switching dynamics and uncontrollable liabilities. To address the uncertainty in the decision-making process within…
Modern evolvements of the technologies have been leading to a profound influence on the financial market. The introduction of constituents like Exchange-Traded Funds, and the wide-use of advanced technologies such as algorithmic trading,…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Machine learning techniques applied to the problem of financial market forecasting struggle with dynamic regime switching, or underlying correlation and covariance shifts in true (hidden) market variables. Drawing inspiration from the…
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.…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
The patterns of different financial data sources vary substantially, and accordingly, investors exhibit heterogeneous cognition behavior in information processing. To capture different patterns, we propose a novel approach called the…
In biology phenotypic switching is a common bet-hedging strategy in the face of uncertain environmental conditions. Existing mathematical models often focus on periodically changing environments to determine the optimal phenotypic response.…
We study the performance of a stochastic algorithm based on the power method that adaptively learns the large deviation functions characterizing the fluctuations of additive functionals of Markov processes, used in physics to model…
Misperceptions about extreme dependencies between different financial assets have been an im- portant element of the recent financial crisis. This paper studies inhomogeneity in dependence structures using Markov switching regular vine…
We present a novel approach to modeling market dynamics using ordinary differential equations that explicitly incorporates product competitiveness and consumer behavior. Our framework treats market segments as interacting populations in a…
In many dynamical systems in nature, the law of the dynamics changes along with the temporal evolution of the system. These changes are often associated with the occurrence of certain events. The timing of occurrence of these events…
This paper presents a framework of imitating the principal investor's behavior for optimal pricing and hedging options. We construct a non-deterministic Markov decision process for modeling stock price change driven by the principal…
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
Portfolio traders strive to identify dynamic portfolio allocation schemes so that their total budgets are efficiently allocated through the investment horizon. This study proposes a novel portfolio trading strategy in which an intelligent…
In this paper we present a continuous time dynamical model of heterogeneous agents interacting in a financial market where transactions are cleared by a market maker. The market is composed of fundamentalist, trend following and contrarian…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
A major impact of globalization has been the information flow across the financial markets rendering them vulnerable to financial contagion. Research has focused on network analysis techniques to understand the extent and nature of such…
This article investigates a regime-switching investment strategy aimed at mitigating downside risk by reducing market exposure during anticipated unfavorable market regimes. We highlight the statistical jump model (JM) for market regime…
A model among many may only be best under certain states of the world. Switching from a model to another can also be costly. Finding a procedure to dynamically choose a model in these circumstances requires to solve a complex estimation…