Related papers: Pairs Trading with Nonlinear and Non-Gaussian Stat…
Non-Gaussian quantum states are a known necessary resource for reaching a quantum advantage and for violating Bell inequalities in continuous variable systems. As one kind of manifestation of quantum correlations, Einstein-Podolsky-Rosen…
This study considers a model of the income distribution of agents whose pairwise interaction is asymmetric and price-invariant. Asymmetric transactions are typical for chain-trading groups who arrange their business such that commodities…
We develop Bayesian state space methods for modelling changes to the mean level or temporal correlation structure of an observed time series due to intermittent coupling with an unobserved process. Novel intervention methods are proposed to…
We develop a new nonparametric approach for estimating the risk-neutral density of asset prices and reformulate its estimation into a double-constrained optimization problem. We evaluate our approach using the S\&P 500 market option prices…
The occurrence of exceptional points (EPs) is a fascinating non-Hermitian feature of open systems. A level-repulsion phenomenon between two complex states of an open system can be realized by positioning an EP and its time-reversal (T)…
We analyze the qualitative differences between prices of double barrier no-touch options in the Heston model and pure jump KoBoL model calibrated to the same set of the empirical data, and discuss the potential for arbitrage opportunities…
Statistical arbitrage methods identify mispricings in securities with the goal of building portfolios which are weakly correlated with the market. In pairs trading, an arbitrage opportunity is identified by observing relative price…
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
We extend the framework of trading strategies of Gatheral [2010] from single stocks to a pair of stocks. Our trading strategy with the executions of two round-trip trades can be described by the trading rates of the paired stocks and the…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…
Bayesian analysis of state-space models includes computing the posterior distribution of the system's parameters as well as filtering, smoothing, and predicting the system's latent states. When the latent states wander around $\mathbb{R}^n$…
In this paper we introduce a new discrete time and continuous state space stationary process $\{X_n; n = 1, 2, \ldots \}$, such that $X_n$ follows a two-parameter generalized exponential (GE) distribution. Joint distribution functions,…
We analyze the properties of arguably the simplest bilinear stochastic multiplicative process, proposed as a model of financial returns and of other complex systems combining both nonlinearity and multiplicative noise. By construction, it…
In this paper we forecast daily returns of crypto-currencies using a wide variety of different econometric models. To capture salient features commonly observed in financial time series like rapid changes in the conditional variance,…
We propose to construct copulas from the inversion of nonlinear state space models. These allow for new time series models that have the same serial dependence structure of a state space model, but with an arbitrary marginal distribution,…
A pair trade is a portfolio consisting of a long position in one asset and a short position in another, and it is a widely applied investment strategy in the financial industry. Recently, Ekstr\"om, Lindberg and Tysk studied the problem of…
We present a systematic study of various statistical characteristics of high-frequency returns from the foreign exchange market. This study is based on six exchange rates forming two triangles: EUR-GBP-USD and GBP-CHF-JPY. It is shown that…
In this study, we applied a stochastic spread pairs trading strategy on the Indian commodity market. The complete set of commodities were taken whose spot price was available for the period of January 1st 2010 to December 31st 2018…
We propose a new functional analytic approach to Stein's method of exchangeable pairs that does not require the pair at hand to satisfy any approximate linear regression property. We make use of this theory in order to derive abstract…
The importance of unspanned macroeconomic variables for Dynamic Term Structure Models has been intensively discussed in the literature. To our best knowledge the earlier studies considered only linear interactions between the economy and…