Related papers: Testing for the Asymmetric Optimal Hedge Ratios: W…
This study introduces a novel approach to walk-forward optimization by parameterizing the lengths of training and testing windows. We demonstrate that the performance of a trading strategy using the Exponential Moving Average (EMA)…
Optimal reinsurance when Value at Risk and expected surplus is balanced through their ratio is studied, and it is demonstrated how results for risk-adjusted surplus can be utilized. Simplifications for large portfolios are derived, and this…
We revisit the fundamental question of Bitcoin's security against double spending attacks. While previous work has bounded the probability that a transaction is reversed, we show that no such guarantee can be effectively given if the…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
We correct the double spend race analysis given in Nakamoto's foundational Bitcoin article and give a closed-form formula for the probability of success of a double spend attack using the Regularized Incomplete Beta Function. We give a…
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital…
In this paper, we discuss the method of Bayesian regression and its efficacy for predicting price variation of Bitcoin, a recently popularized virtual, cryptographic currency. Bayesian regression refers to utilizing empirical data as proxy…
This paper considers the problem of optimal liquidation of a position in a risky security in a financial market, where price evolution are risky and trades have an impact on price as well as uncertainty in the filling orders. The problem is…
Proof-of-work blockchains reward each miner for one completed block by an amount that is, in expectation, proportional to the number of hashes the miner contributed to the mining of the block. Is this proportional allocation rule optimal?…
We analyze Bitcoin mining from the perspective of a game and propose an optimal mining model that maximizes profits of pools and miners. The model is a two-stage Stackelberg game in which each stage forms a sub-game. In stage I, pools are…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
We prove Bitcoin is secure under temporary dishonest majority. We assume the adversary can corrupt a specific fraction of parties and also introduce crash failures, i.e., some honest participants are offline during the execution of the…
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 study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…
This discussion applies quantitative finance methods and economic arguments to cryptocurrencies in general and bitcoin in particular -- as there are about $10,000$ cryptocurrencies, we focus (unless otherwise specified) on the most…
We consider the problem of finding Pareto-optimal allocations of risk among finitely many agents. The associated individual risk measures are law invariant, but with respect to agent-dependent and potentially heterogeneous reference…
This paper examines the relationship between Inverse Perpetual Swap contracts, a Bitcoin derivative akin to futures and the margin funding interest rates levied on BitMEX. This paper proves the Heteroskedastic nature of funding rates and…
In the frictionless discrete time financial market of Bouchard et al.(2015) we consider a trader who, due to regulatory requirements or internal risk management reasons, is required to hedge a claim $\xi$ in a risk-conservative way relative…
Batch policy optimization considers leveraging existing data for policy construction before interacting with an environment. Although interest in this problem has grown significantly in recent years, its theoretical foundations remain…