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We study a credit risk model which captures effects of economic interactions on a firm's default probability. Economic interactions are represented as a functionally defined graph, and the existence of both cooperative, and competitive,…
Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
The generalized fault diagram, a data structure for failure analysis based on the influence diagram, is defined. Unlike the fault tree, this structure allows for dependence among the basic events and replicated logical elements. A heuristic…
This study integrates real-time sentiment analysis from financial news, GPT-2 and FinBERT, with technical indicators and time-series models like ARIMA and ETS to optimize S&P 500 trading strategies. By merging sentiment data with momentum…
The theory of optimal trading under proportional transaction costs has been considered from a variety of perspectives. In this paper, we show that all the results can be interpreted using a universal law, illustrating the results in trading…
In this research, starting from a widely accepted definition of risk, we support the idea that risk reduction is a more realistic objective than risk minimization, which represents a theoretical utopia. Furthermore, significant risk…
Generalized planning is concerned with the characterization and computation of plans that solve many instances at once. In the standard formulation, a generalized plan is a mapping from feature or observation histories into actions,…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
Generalization error bounds are critical to understanding the performance of machine learning models. In this work, building upon a new bound of the expected value of an arbitrary function of the population and empirical risk of a learning…
In this report I present a possible scenario which can lead to the emergence of a generalised Gamma distribution first presented by R. Osorio et al. as the distribution of traded volumes of stocks in financial markets. This propose is…
This survey gives an introduction to monetary measures of risk as monotone and cash additive functions on spaces of univariate random variables. Primal and dual representation results as well as several examples are discussed. Principal…
An investment portfolio consists of $n$ algorithmic trading strategies, which generate vectors of positions in trading assets. Sign opposite trades (buy/sell) cross each other as strategies are combined in a portfolio. Then portfolio…
An extended theoretical approach is proposed to predict the average power of wind turbines in a large finite-size wind farm. The approach is based on the two-scale momentum theory proposed recently for the modelling of ideal very large wind…
We present evidence, that if a large enough set of high resolution stock market data is analyzed, certain analogies with physics -- such as scaling and universality -- fail to capture the full complexity of such data. Despite earlier…
Econophysics and econometrics agree that there is a correlation between volume and volatility in a time series. Using empirical data and their distributions, we further investigate this correlation and discover new ways that volatility and…
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…
Valuation and parity formulas for both European-style and American-style exchange options are presented in a general financial model allowing for jumps, possibility of default and "bubbles" in asset prices. The formulas are given via…
We use the Minority Game as a testing frame for the problem of the emergence of diversity in socio-economic systems. For the MG with heterogeneous impacts, we show that the direct generalization of the usual agents' profit does not fit some…
Betas are possibly the most frequently applied tool to analyze how securities relate to the market. While in very widespread use, betas only express dynamics derived from second moment statistics. Financial returns data often deviate from…