Related papers: Single-Asset Adaptive Leveraged Volatility Control
This paper examines the dividend and investment policies of a cash constrained firm that has access to costly external funding. We depart from the literature by allowing the firm to issue collateralized debt to increase its investment in…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
A constant weight asset allocation is a popular investment strategy and is optimal under a suitable continuous model. We study the tracking error for the target continuous rebalancing strategy by a feasible discrete-in-time rebalancing…
This paper is concerned with the uniqueness issue of open-loop equilibrium investment strategies of dynamic mean-variance portfolio selection problems with random coefficients. A unified method is developed to treat both the problems with…
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…
Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models introduced by Taylor in the description of the log-returns of financial assets. The pricing and hedging of contingent products…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
Value-at-risk (VaR) has been playing the role of a standard risk measure since its introduction. In practice, the delta-normal approach is usually adopted to approximate the VaR of portfolios with option positions. Its effectiveness,…
A product relative error estimation method for single index regression model is proposed as an alternative to absolute error methods, such as the least square estimation and the least absolute deviation estimation. It is scale invariant for…
In this article, we provide a flexible framework for optimal trading in an asset listed on different venues. We take into account the dependencies between the imbalance and spread of the venues, and allow for partial execution of limit…
This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by 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…
As a forward-looking measure of future equity market volatility, the VIX index has gained immense popularity in recent years to become a key measure of risk for market analysts and academics. We consider discrete reported intraday VIX tick…
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a dynamic asset allocation problem that…
In this work, I address the issue of forming riskless hedge in the continuous time option pricing model with stochastic stock volatility. I show that it is essential to verify whether the replicating portfolio is self-financing, in order…
We introduce a new identification strategy for uncertainty shocks to explain macroeconomic volatility in financial markets. The Chicago Board Options Exchange Volatility Index (VIX) measures market expectations of future volatility, but…
For quantitative trading risk management purposes, we present a novel idea: the realized local volatility surface. Concisely, it stands for the conditional expected volatility when sudden market behaviors of the underlying occur. One is…
It is well known that quantile regression model minimizes the portfolio extreme risk, whenever the attention is placed on the estimation of the response variable left quantiles. We show that, by considering the entire conditional…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…