Related papers: A Proposal for Multi-asset Generalised Variance Sw…
A general method to construct recombinant tree approximations for stochastic volatility models is developed and applied to the Heston model for stock price dynamics. In this application, the resulting approximation is a four tuple Markov…
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…
To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying…
In this study, we have investigated empirically the effects of market properties on the degree of diversification of investment weights among stocks in a portfolio. The weights of stocks within a portfolio were determined on the basis of…
Nowadays, more and more datasets are stored in a distributed way for the sake of memory storage or data privacy. The generalized eigenvalue problem (GEP) plays a vital role in a large family of high-dimensional statistical models. However,…
Signatures of universality are detected by comparing individual eigenvalue distributions and level spacings from financial covariance matrices to random matrix predictions. A chopping procedure is devised in order to produce a statistical…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
We introduce a covariance matrix estimator that both takes into account the heteroskedasticity of financial returns (by using an exponentially weighted moving average) and reduces the effective dimensionality of the estimation (and hence…
We introduce the formalism of generalized Fourier transforms in the context of risk management. We develop a general framework to efficiently compute the most popular risk measures, Value-at-Risk and Expected Shortfall (also known as…
The risk of financial positions is measured by the minimum amount of capital to raise and invest in eligible portfolios of traded assets in order to meet a prescribed acceptability constraint. We investigate nondegeneracy, finiteness and…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
We consider the stochastic volatility model obtained by adding a compound Hawkes process to the volatility of the well-known Heston model. A Hawkes process is a self-exciting counting process with many applications in mathematical finance,…
We propose parametric copulas that capture serial dependence in stationary heteroskedastic time series. We develop our copula for first order Markov series, and extend it to higher orders and multivariate series. We derive the copula of a…
A new notion of stochastic ordering is introduced to compare multivariate stochastic risk models with respect to extreme portfolio losses. In the framework of multivariate regular variation comparison criteria are derived in terms of…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving…
In this paper, new results in random matrix theory are derived which allow us to construct a shrinkage estimator of the global minimum variance (GMV) portfolio when the shrinkage target is a random object. More specifically, the shrinkage…
This paper proposes an expected multivariate utility analysis for ESG investors in which green stocks, brown stocks, and a market index are modeled in a one-factor, CAPM-type structure. This setting allows investors to accommodate their…
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].
In this paper we consider a generalization of the Markowitz's Mean-Variance model under linear transaction costs and cardinality constraints. The cardinality constraints are used to limit the number of assets in the optimal portfolio. The…
In this chapter we first briefly review the existing approaches to hedging in rough volatility models. Next, we present a simple but general result which shows that in a one-factor rough stochastic volatility model, any option may be…