Related papers: Compounding Effects in Leveraged ETFs: Beyond the …
We present a new volatility model, simple to implement, that includes a leverage effect whose return-volatility correlation function fits to empirical observations. This model is able to capture both the "retarded effect" induced by the…
A leveraged exchange traded fund (LETF) is an exchange traded fund that uses financial derivatives to amplify the price changes of a basket of goods. In this paper, we consider the robust hedging of European options on a LETF, finding…
We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds…
This study explores the use of Transformer-based models to predict both covariance and semi-covariance matrices for ETF portfolio optimization. Traditional portfolio optimization techniques often rely on static covariance estimates or…
In this paper, motivated by the celebrated work of Kelly, we consider the problem of portfolio weight selection to maximize expected logarithmic growth. Going beyond existing literature, our focal point here is the rebalancing frequency…
We propose a comprehensive treatment of the leverage effect, i.e. the relationship between returns and volatility of a specific asset, focusing on energy commodities futures, namely Brent and WTI crude oils, natural gas and heating oil.…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
Although stochastic volatility and GARCH (generalized autoregressive conditional heteroscedasticity) models have successfully described the volatility dynamics of univariate asset returns, extending them to the multivariate models with…
Many active funds hold concentrated portfolios. Flow-driven trading in these securities causes price pressure, which pushes up the funds' existing positions resulting in realized returns. We decompose fund returns into a price pressure…
This paper analyzes the robust long-term growth rate of expected utility and expected return from holding a leveraged exchange-traded fund (LETF). When the Markovian model parameters in the reference asset are uncertain, the robust…
Lead-lag relationships among assets represent a useful tool for analyzing high frequency financial data. However, research on these relationships predominantly focuses on correlation analyses for the dynamics of stock prices, spots and…
Inspired by the recent literature on aggregation theory, we aim at relating the long range correlation of the stocks return volatility to the heterogeneity of the investors' expectations about the level of the future volatility. Based on a…
Leveraged ETFs (L-ETFs) are exchange-traded funds that achieve price movements several times greater than an index by holding index-linked futures such as Nikkei Stock Average Index futures. It is known that when the price of an L-ETF…
The domain of hedge fund investments is undergoing significant transformation, influenced by the rapid expansion of data availability and the advancement of analytical technologies. This study explores the enhancement of hedge fund…
The paper analyzes the cryptocurrency ecosystem at both the aggregate and individual levels to understand the factors that impact future volatility. The study uses high-frequency panel data from 2020 to 2022 to examine the relationship…
We present a systematic trading framework that forecasts short-horizon market risk, identifies its underlying drivers, and generates alpha using a hybrid machine learning ensemble built to trade on the resulting signal. The framework…
The leverage effect refers to the generally negative correlation between the return of an asset and the changes in its volatility. There is broad agreement in the literature that the effect should be present for theoretical reasons, and it…
Several phenomena are available representing market activity: volumes, number of trades, durations between trades or quotes, volatility - however measured - all share the feature to be represented as positive valued time series. When…
The lead-lag effect, where the price movement of one asset systematically precedes that of another, has been widely observed in financial markets and conveys valuable predictive signals for trading. However, traditional lead-lag detection…
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of…