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The aim of this paper is to establish Hoeffding and Bernstein type concentration inequalities for weighted sums of exchangeable random variables. A special case is the i.i.d. setting, where random variables are sampled independently from…
Correlations between random variables play an important role in applications, e.g.\ in financial analysis. More precisely, accurate estimates of the correlation between financial returns are crucial in portfolio management. In particular,…
We present a novel reshuffling exchange model and investigate its long time behavior. In this model, two individuals are picked randomly, and their wealth $X_i$ and $X_j$ are redistributed by flipping a sequence of fair coins leading to a…
The probability distribution for the relative return of a portfolio constructed from a subset n of the assets from a benchmark, consisting of N assets whose returns are multivariate normal, is completely characterized by its tracking error.…
We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new…
The classical Markowitz mean-variance model uses variance as a risk measure and calculates frontier portfolios in closed form by using standard optimization techniques. For general mean-risk models such closed form optimal portfolios are…
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…
Mean-reverting assets are one of the holy grails of financial markets: if such assets existed, they would provide trivially profitable investment strategies for any investor able to trade them, thanks to the knowledge that such assets…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
The eigenvalue distribution of Hoppe's two matrix model is investigated in detail as a function of the model's coupling. For small couplings it is a perturbed Wigner semicircle, while for large couplings it is a parabolic distribution which…
In this work, we study a dynamic portfolio optimization problem related to pairs trading, which is an investment strategy that matches a long position in one security with a short position in another security with similar characteristics.…
We prove a large deviations principle for the class of multidimensional affine stochastic volatility models considered in (Gourieroux, C. and Sufana, R., J. Bus. Econ. Stat., 28(3), 2010), where the volatility matrix is modelled by a…
This paper investigates improved testing inferences under a general multivariate elliptical regression model. The model is very flexible in terms of the specification of the mean vector and the dispersion matrix, and of the choice of the…
We propose a novel probabilistic model to facilitate the learning of multivariate tail dependence of multiple financial assets. Our method allows one to construct from known random vectors, e.g., standard normal, sophisticated joint…
We propose and experimentally demonstrate an innovative stock index prediction method using a weighted optical reservoir computing system. We construct fundamental market data combined with macroeconomic data and technical indicators to…
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
We introduce a new model for sums of exchangeable binary random variables. The proposed distribution is an approximation to the exact distributional form, and relies on the theory of completely monotone functions and the Laplace transform…
This paper uses simulation-based portfolio optimization to mitigate the left tail risk of the portfolio. The contribution is twofold. (i) We propose the Markov regime-switching GARCH model with multivariate normal tempered stable innovation…