Related papers: Analysis of a five-factor capital market model
Long term optimal investment problems are studied in a factor model with matrix valued state variables. Explicit parameter restrictions are obtained under which, for an isoelastic investor, the finite horizon value function and optimal…
As the Chinese stock market continues to evolve and its market structure grows increasingly complex, traditional quantitative trading methods are facing escalating challenges. Particularly, due to policy uncertainty and the frequent market…
Energy companies need efficient procedures to perform market calibration of stochastic models for commodities. If the Black framework is chosen for option pricing, the bottleneck of the market calibration is the computation of the variance…
Financial stock returns correlations have been studied in the prism of random matrix theory, to distinguish the signal from the "noise". Eigenvalues of the matrix that are above the rescaled Marchenko Pastur distribution can be interpreted…
We present a new model for commodity pricing that enhances accuracy by integrating four distinct risk factors: spot price, stochastic volatility, convenience yield, and stochastic interest rates. While the influence of these four variables…
We study optimal investment problem for a diffusion market consisting of a finite number of risky assets (for example, bonds, stocks and options). Risky assets evolution is described by Ito's equation, and the number of risky assets can be…
In this paper, we study the exponential utility indifference pricing of pure endowment policies within a stochastic-factor model for an insurer who also invests in a financial market. Our framework incorporates a hazard rate modeled as an…
Mean-reverting portfolios with volatility and sparsity constraints are of prime interest to practitioners in finance since they are both profitable and well-diversified, while also managing risk and minimizing transaction costs. Three main…
We propose a characteristics-augmented quantile factor (QCF) model, where unknown factor loading functions are linked to a large set of observed individual-level (e.g., bond- or stock-specific) covariates via a single-index projection. The…
We statistically analyse a multivariate HJM diffusion model with stochastic volatility. The volatility process of the first factor is left totally unspecified while the volatility of the second factor is the product of an unknown process…
Modeling and forecasting covariance matrices of asset returns play a crucial role in finance. The availability of high frequency intraday data enables the modeling of the realized covariance matrix directly. However, most models in the…
This paper discusses the efficient Bayesian estimation of a multivariate factor stochastic volatility (Factor MSV) model with leverage. We propose a novel approach to construct the sampling schemes that converges to the posterior…
In setting up a stochastic description of the time evolution of a financial index, the challenge consists in devising a model compatible with all stylized facts emerging from the analysis of financial time series and providing a reliable…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
A dynamical system analysis is performed for a model of dissipative quintessential inflation realizing warm inflation at early primordial times and dissipative interations in the dark sector at late times. The construction makes use of a…
We consider a Black-Scholes market in which a number of stocks and an index are traded. The simplified Capital Asset Pricing Model is the conjunction of the usual Capital Asset Pricing Model, or CAPM, and the statement that the appreciation…
Post Modigliani and Miller (1958), the concept of usage of arbitrage created a permanent mark on the discourses of financial framework. The arbitrage process is largely based on information dissemination amongst the stakeholders operating…
In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…