Related papers: Dynamic factor, leverage and realized covariances …
I discuss some theoretical results with a view to motivate some practical choices in portfolio optimization. Even though the setting is not completely general (for example, the covariance matrix is assumed to be non-singular), I attempt to…
We report evidence of a deep interplay between cross-correlations hierarchical properties and multifractality of New York Stock Exchange daily stock returns. The degree of multifractality displayed by different stocks is found to be…
With the daily and minutely data of the German DAX and Chinese indices, we investigate how the return-volatility correlation originates in financial dynamics. Based on a retarded volatility model, we may eliminate or generate the…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
This study utilised the dynamics of five time-varying models to estimate six essential features of financial return volatility that are relevant for robust risk management. These features include pronounced persistence, mean reversion,…
Scalar dynamic risk measures for univariate positions in continuous time are commonly represented as backward stochastic differential equations. In the multivariate setting, dynamic risk measures have been defined and studied as families of…
Multivariate stochastic volatility models with skew distributions are proposed. Exploiting Cholesky stochastic volatility modeling, univariate stochastic volatility processes with leverage effect and generalized hyperbolic skew…
While the investors' responses to price changes and their price forecasts are well accepted major factors contributing to large price fluctuations in financial markets, our study shows that investors' heterogeneous and dynamic risk aversion…
Factor models have become a common and valued tool for understanding the risks associated with an investing strategy. In this report we describe Exabel's factor model, we quantify the fraction of the variability of the returns explained by…
Dynamic factor models have been developed out of the need of analyzing and forecasting time series in increasingly high dimensions. While mathematical statisticians faced with inference problems in high-dimensional observation spaces were…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
The variance--covariance matrix plays a central role in the inferential theories of high-dimensional factor models in finance and economics. Popular regularization methods of directly exploiting sparsity are not directly applicable to many…
This paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to…
This paper investigates optimal portfolio strategies in a market where the drift is driven by an unobserved Markov chain. Information on the state of this chain is obtained from stock prices and expert opinions in the form of signals at…
Applying a network analysis to stock return correlations, we study the dynamical properties of the network and how they correlate with the market return, finding meaningful variables that partially capture the complex dynamical processes of…
One of the most important studies in finance is to find out whether stock returns could be predicted. This research aims to create a new multivariate model, which includes dividend yield, earnings-to-price ratio, book-to-market ratio as…
In this paper we perform robustness and sensitivity analysis of several continuous-time stochastic volatility (SV) models with respect to the process of market calibration. The analyses should validate the hypothesis on importance of the…
A spring-block chain placed on a running conveyor belt is considered for modeling stylized facts observed in the dynamics of stock indexes. Individual stocks are modeled by the blocks, while the stock-stock correlations are introduced via…
Heterogeneity of many building materials complicates numerical modelling of structural behaviour. The material randomicity can be manifested by different values of material parameters of each material specimen. To capture inherent…
For quantitative trading risk management purposes, we present a novel idea: the realized local volatility surface. Concisely, it stands for the conditional expected volatility when sudden market behaviors of the underlying occur. One is…