Related papers: Risk-Free Rate in the Covid-19 Pandemic: Applicati…
Traders and investors involved in an option contract having the underlying stock in range bound are likely to lose their initial investment. Timing in buying an option contract is of capital importance. In a recent article [1] the…
The COVID-19 pandemic has severely affected many aspects of people's daily lives. While many countries are in a re-opening stage, some effects of the pandemic on people's behaviors are expected to last much longer, including how they choose…
Take up of microcredit by the poor for investment in businesses or human capital turned out to be very low. We show that this could be explained by risk aversion, without relying on fixed costs or other forms of non-convexity in the…
We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky…
We point out some major drawbacks in random trading market models and propose a realistic modification which overcomes such drawbacks through `sensible trading'. We apply such trading policy in different situations: a) Agents with zero…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…
Encouraged by decision makers' appetite for future information on topics ranging from elections to pandemics, and enabled by the explosion of data and computational methods, model based forecasts have garnered increasing influence on a…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
This study analyses oil price movements through the lens of an agnostic random forest model, which is based on 1,000 regression trees. It shows that this highly disciplined, yet flexible computational model reduces in sample root mean…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial…
In this paper, making use of recent statistical physics techniques and models, we address the specific role of randomness in financial markets, both at the micro and the macro level. In particular, we review some recent results obtained…
In March 2020, the world was thrown into financial distress. This manifested itself in increased uncertainty in the financial markets. Many interest rates collapsed, and funding spreads surged significantly, which increased due to the…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…
During the COVID-19 pandemic, the behavioral response to reported case numbers changed drastically over time. While a few dozen cases were enough to trigger government-induced and voluntary contact reduction in early 2020, less than a year…
An investor with constant relative risk aversion and an infinite planning horizon trades a risky and a safe asset with constant investment opportunities, in the presence of small transaction costs and a binding exogenous portfolio…
Hedge Funds are considered as one of the portfolio management sectors which shows a fastest growing for the past decade. An optimal Hedge Fund management requires an appropriate risk metrics. The classic CAPM theory and its Ratio Sharpe…
Dealers in foreign exchange markets provide bid and ask prices to their clients at which they are happy to buy and sell, respectively. To manage risk, dealers can skew their quotes and hedge in the interbank market. Hedging offers certainty…
Applying historical data from the USD LIBOR transition period, we estimate a joint model for SOFR, Fed Funds, and Eurodollar futures rates as well as spot USD LIBOR and term repo rates. The framework endogenously models basis spreads…