Related papers: Lost in Diversification
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
The role of credit rating agencies has been under severe scrutiny after the subprime crisis. In this paper we explore the relationship between credit ratings and informational efficiency of a sample of thirty nine corporate bonds of US oil…
The problem of private information "leakage" (inadvertently or by malicious design) from the myriad large centralized searchable data repositories drives the need for an analytical framework that quantifies unequivocally how safe private…
The disposition effect describes investors' irrational behavior of selling profitable assets too soon while holding onto losing assets for too long. This study examines the impact of transparency at the firm level on the disposition effect…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
Estimation error has plagued quantitative finance since Harry Markowitz launched modern portfolio theory in 1952. Using random matrix theory, we characterize a source of bias in the sample eigenvectors of financial covariance matrices.…
Observations on the past provide some hints about what will happen in the future, and this can be quantified using information theory. The ``predictive information'' defined in this way has connections to measures of complexity that have…
This paper considers finitely many investors who perform mean-variance portfolio selection under relative performance criteria. That is, each investor is concerned about not only her terminal wealth, but how it compares to the average…
Financial portfolio optimization is a widely studied problem in mathematics, statistics, financial and computational literature. It adheres to determining an optimal combination of weights associated with financial assets held in a…
Information Theory provides a fundamental basis for analysis, and for a variety of subsequent methodological approaches, in relation to uncertainty quantification. The transversal character of concepts and derived results justifies its…
In many stochastic problems, the output of interest depends on an input random vector mainly through a single random variable (or index) via an appropriate univariate transformation of the input. We exploit this feature by proposing an…
In financial asset management, choosing a portfolio requires balancing returns, risk, exposure, liquidity, volatility and other factors. These concerns are difficult to compare explicitly, with many asset managers using an intuitive or…
Portfolio diversification, traditionally measured through asset correlations and volatilitybased metrics, is fundamental to managing financial risk. However, existing diversification metrics often overlook non-numerical relationships…
The concept of multifractality offers a powerful formal tool to filter out multitude of the most relevant characteristics of complex time series. The related studies thus far presented in the scientific literature typically limit themselves…
Classical portfolio optimization methods typically determine an optimal capital allocation through the implicit, yet critical, assumption of statistical time-invariance. Such models are inadequate for real-world markets as they employ…
I consider the many ways in which evolved information-flows are restricted and metabolic resources protected and hidden -- the thesis of living phenomena as evolutionary cryptosystems. I present the information theory of secrecy systems and…
This paper introduces a novel methodology for index return forecasting, blending highly correlated stock prices, advanced deep learning techniques, and intricate factor integration. Departing from conventional cap-weighted approaches, our…
This paper provides a holistic study of how stock prices vary in their response to financial disclosures across different topics. Thereby, we specifically shed light into the extensive amount of filings for which no a priori categorization…
We address the problem of the information-disturbance trade-off associated to the estimation of a quantum transformation, and show how the extraction of information about the a black box causes a perturbation of the corresponding…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk…