Related papers: Betting Against (Bad) Beta
Alpha signals for statistical arbitrage strategies are often driven by latent factors. This paper analyses how to optimally trade with latent factors that cause prices to jump and diffuse. Moreover, we account for the effect of the trader's…
We experimentally evaluate the comparative performance of the winner-bid, average-bid, and loser-bid auctions for the dissolution of a partnership. The analysis of these auctions based on the empirical equilibrium refinement of Velez and…
Testing by betting has been a cornerstone of the game-theoretic statistics literature. One bets against the null hypothesis, and the accumulated wealth $W_t$ quantifies the evidence against the null hypothesis after $t$ rounds, and the null…
Recently, several researchers have claimed that conclusions obtained from a Bayes factor (or the posterior odds) may contradict those obtained from Bayesian posterior estimation. In this short paper, we wish to point out that no such…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
Humans exhibit time-inconsistent behavior, in which planned actions diverge from executed actions. Understanding time inconsistency and designing appropriate interventions is a key research challenge in computer science and behavioral…
We give an algorithm and source code for a cryptoasset statistical arbitrage alpha based on a mean-reversion effect driven by the leading momentum factor in cryptoasset returns discussed in https://ssrn.com/abstract=3245641. Using empirical…
This paper is devoted to study the effects arising from imposing a value-at-risk (VaR) constraint in mean-variance portfolio selection problem for an investor who receives a stochastic cash flow which he/she must then invest in a…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
Bet-hedging is a phenotype diversification strategy that combines a fast-growing vulnerable phenotype with a slow-growing resistant phenotype. In environments switching between favorable and unfavorable conditions, bet-hedging optimizes…
We give a criterion under which the expected return on a ticket for certain large lotteries is positive. In this circumstance, we use elementary portfolio analysis to show that an optimal investment strategy includes a very small allocation…
Portfolio management is an essential component of investment strategy that aims to maximize returns while minimizing risk. This paper explores several portfolio management strategies, including asset allocation, diversification, active…
Corporate bond factor research faces a replication crisis. The crisis stems from two sources that inflate reported factor premia: transaction prices whose measurement error enters both sorting signals and return denominators, creating a…
We refine the analysis of hedging strategies for options under the SABR model carried out in [2]. In particular, we provide a theoretical justification of the empirical observation made in [2] that the modified delta ("Bartlett's delta")…
We explore the effect of discounting and experimentation in a simple model of interacting adaptive agents. Agents belong to either of two types and each has to decide whether to participate a game or not, the game being profitable when…
Different models of capital exchange among economic agents have been proposed recently trying to explain the emergence of Pareto's wealth power law distribution. One important factor to be considered is the existence of risk aversion. In…
We provide a unifying way to analyze how risk aversion changes bidding in auctions by asking which bids become more attractive as bidders become more risk averse. In first-price auctions, under two payoff conditions--winning is never worse…