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Extreme Value Theory (EVT) is one of the most commonly used approaches in finance for measuring the downside risk of investment portfolios, especially during financial crises. In this paper, we propose a novel approach based on EVT called…
Traditional approaches to financial asset allocation start with returns forecasting followed by an optimization stage that decides the optimal asset weights. Any errors made during the forecasting step reduce the accuracy of the asset…
This report presents a systematic market-neutral, multi-factor investment strategy for New York Stock Exchange equities with the objective of delivering steady returns while minimizing correlation with the market. A robust feature set is…
In this paper, we explore the pricing and hedging strategies for an innovative insurance product called the equity protection swap(EPS). Notably, we focus on the application of EPSs involving cross-currency reference portfolios, reflecting…
Optimal execution of portfolio transactions is the essential part of algorithmic trading. In this paper we present in simple analytical form the optimal trajectory for risk-averse trader with the assumption of exponential market recovery…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
In this paper, we propose a novel frequency-severity joint trip-level risk index that combines the frequency of abnormal driving patterns with a severity component reflecting how extreme such behavior is relative to a portfolio-level…
Fifty North Sea oil & gas investment transactions were analysed using traditional spreadsheet based financial modelling methods. The purpose of the analysis was to determine if there was a statistically significant relationship between the…
Based on a recent theorem due to the authors, it is shown how the extreme tail dependence between an asset and a factor or index or between two assets can be easily calibrated. Portfolios constructed with stocks with minimal tail dependence…
This paper explores the applications of the 20/60/20 rule-a heuristic method that segments data into top-performing, average-performing, and underperforming groups-in mathematical finance. We review the statistical foundations of this rule…
We review some fundamental concepts of investment from a mathematical perspective, concentrating specifically on fractional-Kelly portfolios, which allocate a fraction of wealth to a growth-optimal portfolio while the remainder collects (or…
The aim of this paper is to identify the determinants of international stock markets integration. Intuitively we selected a great number of factors linked to financial integration. Then, we developed an international asset-pricing model…
With increasing competition and pace in the financial markets, robust forecasting methods are becoming more and more valuable to investors. While machine learning algorithms offer a proven way of modeling non-linearities in time series,…
Recent financial disasters emphasised the need to investigate the consequence associated with the tail co-movements among institutions; episodes of contagion are frequently observed and increase the probability of large losses affecting…
The Total Portfolio Approach and Strategic Asset Allocation are widely viewed as competing frameworks for institutional portfolio management. We argue they differ in a single governance parameter: the tracking error constraint. Using U.S.…
Stock trading strategy plays a crucial role in investment companies. However, it is challenging to obtain optimal strategy in the complex and dynamic stock market. We explore the potential of deep reinforcement learning to optimize stock…
The entropic value-at-risk (EVaR) is a new coherent risk measure, which is an upper bound for both the value-at-risk (VaR) and conditional value-at-risk (CVaR). As important properties, the EVaR is strongly monotone over its domain and…
The energy market, and specifically the renewable sector carries volatility and risks, similar to the financial market. Here, we leverage on a well-established, return-risk approach, commonly used by equity portfolio-managers and apply it…
This paper develops a structural framework for characterizing the informational feasibility of financial markets under heterogeneous institutional and geopolitical conditions. Departing from the assumption of uniform and time-invariant…
This paper studies the general relationship between the gearing ratio of a Leveraged ETF and its corresponding expense ratio, viz., the investment management fees that are charged for the provision of this levered financial service. It must…