Related papers: An Asymmetric Capital Asset Pricing Model
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…
The variance measures the portfolio risks the investors are taking. The investor, who holds his portfolio and doesn't trade his shares, at the current time can use the time series of the market trades that were made during the averaging…
We predict asset returns and measure risk premia using a prominent technique from artificial intelligence -- deep sequence modeling. Because asset returns often exhibit sequential dependence that may not be effectively captured by…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
A market model in Stochastic Portfolio Theory is a finite system of strictly positive stochastic processes. Each process represents the capitalization of a certain stock. If at any time no stock dominates almost the entire market, which…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
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…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
Trading styles can be classified into either trend-following or mean-reverting. If the net trading style is trend-following the traded asset is more likely to move in the same direction it moved previously (the opposite is true if the net…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
Market Mill is a complex dependence pattern leading to nonlinear correlations and predictability in intraday dynamics of stock prices. The present paper puts together previous efforts to build a dynamical model reflecting the market mill…
Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set…
The family of admissible positions in a transaction costs model is a random closed set, which is convex in case of proportional transaction costs. However, the convexity fails, e.g. in case of fixed transaction costs or when only a finite…
Large and stable indices of the world wide stock markets such as NYSE and SP 500 together with NASDAQ -- the index representing markets of new trends, and WIG -- the index of the local stock market of Eastern Europe, are considered. Due to…
We present a mathematical model of a market with $m$ shares traded across $n$ investor groups, each one with similar motivations and trading strategies. The market of each asset consists of a fixed amount of cash and shares (no additions…
In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…
The paper concerns primal and dual representations as well as time consistency of set-valued dynamic risk measures. Set-valued risk measures appear naturally when markets with transaction costs are considered and capital requirements can be…
We propose a mathematical model of momentum risk-taking, which is essentially real-time risk management focused on short-term volatility of stock markets. Its implementation, our fully automated momentum equity trading system presented…