Related papers: Implied Basket Correlation Dynamics
To investigate the universal structure of interactions in financial dynamics, we analyze the cross-correlation matrix C of price returns of the Chinese stock market, in comparison with those of the American and Indian stock markets. As an…
Spreading processes play an increasingly important role in modeling for diffusion networks, information propagation, marketing and opinion setting. We address the problem of learning of a spreading model such that the predictions generated…
We pose the estimation and predictability of stock market performance. Three cases are taken: US, Japan, Germany, the monthly index of the value of realized investment in stocks, prices plus the value of dividend payments (OECD data). Once…
We take a new look at the problem of disentangling the volatility and jumps processes of daily stock returns. We first provide a computational framework for the univariate stochastic volatility model with Poisson-driven jumps that offers a…
Causal inference and the estimation of causal effects plays a central role in decision-making across many areas, including healthcare and economics. Estimating causal effects typically requires an estimator that is tailored to each problem…
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We describe the dynamics of…
This paper proposes the option-implied Fourier-cosine method, iCOS, for non-parametric estimation of risk-neutral densities, option prices, and option sensitivities. The iCOS method leverages the Fourier-based COS technique, proposed by…
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in…
The cross correlation matrix between equities comprises multiple interactions between traders with varying strategies and time horizons. In this paper, we use the Maximum Overlap Discrete Wavelet Transform to calculate correlation matrices…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
In this letter, we analyze the performance trade-off in distributed integrated sensing and communication (ISAC) networks. Specifically, with the aid of stochastic geometry theory, we derive the probability of detection of that of the…
We derive the asymptotic theory of Bai (2009)'s interactive fixed effects estimator for unbalanced panels in which the source of attrition is conditionally random. For inference, we propose a method of alternating projections algorithm…
Missing values are prevalent across various fields, posing challenges for training and deploying predictive models. In this context, imputation is a common practice, driven by the hope that accurate imputations will enhance predictions.…
Mediation analysis is a form of causal inference that investigates indirect effects and causal mechanisms. Confidence intervals for indirect effects play a central role in conducting inference. The problem is non-standard leading to…
In this paper, we introduce a large system of interacting financial agents in which each agent is faced with the decision of how to allocate his capital between a risky stock or a risk-less bond. The investment decision of investors,…
Identifying meaningful relationships between the price movements of financial assets is a challenging but important problem in a variety of financial applications. However with recent research, particularly those using machine learning and…
We highlight a very simple statistical tool for the analysis of financial bubbles, which has already been studied in [1]. We provide extensive empirical tests of this statistical tool and investigate analytically its link with stocks…
The purpose of this paper is to improve the accuracy of dynamic hedging using implied volatilities generated by genetic programming. Using real data from S&P500 index options, the genetic programming's ability to forecast Black and Scholes…
No--arbitrage property provides a simple method for pricing financial derivatives. However, arbitrage opportunities exist among different markets in various fields, even for a very short time. By knowing that an arbitrage property exists,…
We give examples of situations -- stochastic production, military tactics, corporate merger -- where it is beneficial to concentrate risk rather than to diversify it, that is, to put all eggs in one basket. Our examples admit a dual…