Related papers: A Proposal for Multi-asset Generalised Variance Sw…
This paper introduces a novel robust trading paradigm, called \textit{multi-double linear policies}, situated within a \textit{generalized} lattice market. Distinctively, our framework departs from most existing robust trading strategies,…
Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…
A spin model is used for simulations of financial markets. To determine return volatility in the spin financial market we use the GARCH model often used for volatility estimation in empirical finance. We apply the Bayesian inference…
We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
A market portfolio is a portfolio in which each asset is held at a weight proportional to its market value. Functionally generated portfolios are portfolios for which the logarithmic return relative to the market portfolio can be decomposed…
Classical mean-variance portfolio theory tells us how to construct a portfolio of assets which has the greatest expected return for a given level of return volatility. Utility theory then allows an investor to choose the point along this…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
Jumps and market microstructure noise are stylized features of high-frequency financial data. It is well known that they introduce bias in the estimation of volatility (including integrated and spot volatilities) of assets, and many methods…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
In this paper, we document a novel machine learning based bottom-up approach for static and dynamic portfolio optimization on, potentially, a large number of assets. The methodology applies to general constrained optimization problems and…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
The investor is interested in the expected return and he is also concerned about the risk and the uncertainty assumed by the investment. One of the most popular concepts used to measure the risk and the uncertainty is the variance and/or…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
This paper proposes a semiparametric stochastic volatility (SV) model that relaxes the restrictive Gaussian assumption in both the return and volatility error terms, allowing them to follow flexible, nonparametric distributions with…
As markets have digitized, the number of tradable products has skyrocketed. Algorithmically constructed portfolios of these assets now dominate public and private markets, resulting in a combinatorial explosion of tradable assets. In this…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
A sequence of random variables is exchangeable if its joint distribution is invariant under variable permutations. We introduce exchangeable variable models (EVMs) as a novel class of probabilistic models whose basic building blocks are…