Related papers: Lost in Diversification
We discuss the role of information entropy on the behaviour of random processes, and how this might take effect in the dynamics of financial market prices. We then go on to show how the Open Quantum Systems approach can be used as a more…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
The question of how to stabilize financial systems has attracted considerable attention since the global financial crisis of 2007-2009. Recently, Beale et al. ("Individual versus systemic risk and the regulator's dilemma", Proc Natl Acad…
We study the sensitivity to estimation error of portfolios optimized under various risk measures, including variance, absolute deviation, expected shortfall and maximal loss. We introduce a measure of portfolio sensitivity and test the…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
We identify fundamental issues with discretization when estimating information-theoretic quantities in the analysis of data. These difficulties are theoretical in nature and arise with discrete datasets carrying significant implications for…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
In this thesis we consider the problem of information hiding in the scenarios of interactive systems, statistical disclosure control, and refinement of specifications. We apply quantitative approaches to information flow in the first two…
Investment returns naturally reside on irregular domains, however, standard multivariate portfolio optimization methods are agnostic to data structure. To this end, we investigate ways for domain knowledge to be conveniently incorporated…
Risk diversification is the basis of insurance and investment. It is thus crucial to study the effects that could limit it. One of them is the existence of systemic risk that affects all the policies at the same time. We introduce here a…
The probability minimizing problem of large losses of portfolio in discrete and continuous time models is studied. This gives a generalization of quantile hedging presented in [3].
Biological information processing manifests a huge variety in its complexity and capability among different organisms, which presumably stems from the evolutionary optimization under limited computational resources. Starting from the…
Complex systems are found in most branches of science. It is still argued how to best quantify their complexity and to what end. One prominent measure of complexity (the statistical complexity) has an operational meaning in terms of the…
Risk assessment under different possible scenarios is a source of uncertainty that may lead to concerning financial losses. We address this issue, first, by adapting a robust framework to the class of spectral risk measures. Second, we…
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…
In recent years, the economic policy of privatization, which is defined as the transfer of property or responsibility from public sector to private sector, is one of the global phenomenon that increases use of markets to allocate resources.…
Specialization and diversification are two major strategies that complex systems might exploit. Given a fixed amount of resources, the question is whether to invest this in elements that respond in a correlated manner to external…
A general notion of information-related complexity applicable to both natural and man-made systems is proposed. The overall approach is to explicitly consider a rational agent performing a certain task with a quantifiable degree of success.…
Using frequency distributions of daily closing price time series of several financial market indexes, we investigate whether the bias away from an equiprobable sequence distribution found in the data, predicted by algorithmic information…
Aghamolla and Smith (2023) make a significant contribution to enhancing our understanding of how managers choose financial reporting complexity. I outline the key assumptions and implications of the theory, and discuss two empirical…