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Factor models are a class of powerful statistical models that have been widely used to deal with dependent measurements that arise frequently from various applications from genomics and neuroscience to economics and finance. As data are…
By applying network analysis techniques to large input-output system, we identify key sectors in the local/regional economy. We overcome the limitations of traditional measures of centrality by using random-walk based measures, as an…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
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…
The comovement phenomenon in financial markets creates decision scenarios with positively correlated asset returns. This paper addresses covariance matrix estimation under such conditions, motivated by observations of significant positive…
We propose a novel framework for approximate factor models that integrates an S-vine copula structure to capture complex dependencies among common factors. Our estimation procedure proceeds in two steps: first, we apply principal component…
This paper develops a dynamic factor model in which common level and volatility factors evolve jointly, allowing conditional means and variances to interact endogenously within a large-information setting. The joint evolution of these…
This article explores dynamic factor allocation by analyzing the cyclical performance of factors through regime analysis. The authors focus on a U.S. equity investment universe comprising seven long-only indices representing the market and…
The primary objective of this research is to build a Momentum Transformer that is expected to outperform benchmark time-series momentum and mean-reversion trading strategies. We extend the ideas introduced in the paper Trading with the…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
Fundamental variables in financial market are not only price and return but a very important role is also played by trading volumes. Here we propose a new multivariate model that takes into account price returns, logarithmic variation of…
In risk management it is desirable to grasp the essential statistical features of a time series representing a risk factor. This tutorial aims to introduce a number of different stochastic processes that can help in grasping the essential…
We study market-to-book ratios of stocks in the context of Stochastic Portfolio Theory. Functionally generated portfolios that depend on auxiliary economic variables other than relative capitalizations ("sizes") are developed in two ways,…
Many economic environments involve units linked by a network. I develop an econometric framework that derives the dynamics of cross-sectional variables from the lagged innovation transmission along bilateral links and that can accommodate…
This study develops a multi-factor framework where not only market risk is considered but also potential changes in the investment opportunity set. Although previous studies find no clear evidence about a positive and significant relation…
This paper provides a general method to translate a standard economic model with a large number of agents into a field-formalism model. This formalism preserves the system's interactions and microeconomic features at the individual level…
The Fama-French three factor models are commonly used in the description of asset returns in finance. Statistically speaking, the Fama-French three factor models imply that the return of an asset can be accounted for directly by the…
Accurate volatility forecasts are vital in modern finance for risk management, portfolio allocation, and strategic decision-making. However, existing methods face key limitations. Fully multivariate models, while comprehensive, are…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
A factor copula model is proposed in which factors are either simulable or estimable from exogenous information. Point estimation and inference are based on a simulated methods of moments (SMM) approach with non-overlapping simulation…