Multinomial VaR Backtests: A simple implicit approach to backtesting expected...
Under the Fundamental Review of the Trading Book (FRTB) capital charges for the trading book are based on the coherent expected shortfall (ES) risk measure, which show greater sensitivity to tail risk....
View ArticleAnalysis of Price and Income Elasticities of Energy Demand in Ecuador: A...
Energy consumption in Ecuador has increased significantly during the last decades, affecting negatively the financial position of the country since large energy consumption subsidies are provided in...
View ArticleToward Economics as a New Complex System. (arXiv:1611.05280v1 [q-fin.EC])
The 2015 Nobel Prize in Economic Sciences was awarded to Eugene Fama, Lars Peter Hansen and Robert Shiller for their contributions to the empirical analysis of asset prices. Eugene Fama [1] is an...
View ArticleComputation of first-order Greeks for barrier options using chain rules for...
This paper presents a new methodology to compute first-order Greeks for barrier options under the framework of path-dependent payoff functions with European, Lookback, or Asian type and with...
View ArticleA decomposition algorithm for computing income taxes with pass-through...
Income tax systems with pass-through entities transfer a firm's incomes to the shareholders, which are taxed individually. In 2014, a Chilean tax reform introduced this type of entity and changed to an...
View ArticleThe Tragedy of Your Upstairs Neighbors: Is the Airbnb Negative Externality...
A commonly expressed concern about the rise of the peer-to-peer rental market Airbnb is that hosts---those renting out their properties---impose costs on their unwitting neighbors. I consider the...
View ArticleRandom matrix approach to estimation of high-dimensional factor models....
In dealing with high-dimensional data sets, factor models are often useful for dimension reduction. The estimation of factor models has been actively studied in various fields. In the first part of...
View ArticleRobust Trading of Implied Skew. (arXiv:1611.05518v1 [q-fin.PR])
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This...
View ArticleConstrained Optimal Transport. (arXiv:1610.02940v1 [math.FA] CROSS LISTED)
The classical duality theory of Kantorovich and Kellerer for the classical optimal transport is generalized to an abstract framework and a characterization of the dual elements is provided. This...
View ArticleOn convex functions on the duals of $\Delta_2$-Orlicz spaces....
In the dual $L^{\Phi^*}$ of a $\Delta_2$-Orlicz space $L^\Phi$, we show that a proper (resp. finite) convex function is lower semicontinuous (resp. continuous) for the Mackey topology...
View ArticleCalibration to American Options: Numerical Investigation of the...
American options are the reference instruments for the model calibration of a large and important class of single stocks. For this task, a fast and accurate pricing algorithm is indispensable. The...
View ArticleOn the wavelets-based SWIFT method for backward stochastic differential...
We propose a numerical algorithm for backward stochastic differential equations based on time discretization and trigonometric wavelets. This method combines the effectiveness of Fourier-based methods...
View ArticleValue-at-Risk Prediction in R with the GAS Package. (arXiv:1611.06010v1...
GAS models have been recently proposed in time-series econometrics as valuable tools for signal extraction and prediction. This paper details how financial risk managers can use GAS models for...
View ArticleDynamical Stationarity as a Result of Sustained Random Growth....
In sustained growth with random dynamics stationary distributions can exist without detailed balance. This suggests thermodynamical behavior in fast growing complex systems. In order to model such...
View ArticleSystemic Risk and Interbank Lending. (arXiv:1611.06672v1 [q-fin.MF])
We propose a simple model of inter-bank lending and borrowing incorporating a game feature where the evolution of monetary reserve is described by a system of coupled Feller diffusions. The...
View ArticleQuantifying immediate price impact of trades based on the $k$-shell...
Traders in a stock market exchange stock shares and form a stock trading network. Trades at different positions of the stock trading network may contain different information. We construct stock...
View ArticleModel reduction for calibration of American options. (arXiv:1611.06452v1...
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher...
View ArticleInterplay between endogenous and exogenous fluctuations in financial markets....
We address microscopic, agent based, and macroscopic, stochastic, modeling of the financial markets combining it with the exogenous noise. The interplay between the endogenous dynamics of agents and...
View ArticleRegression-based complexity reduction of the dual nested Monte Carlo methods....
In this paper we propose a novel dual regression-based approach for pricing American options. This approach reduces the complexity of the nested Monte Carlo method and has especially simple form for...
View Article"Chaos" in energy futures markets: a controversial matter....
In this paper we study the possible "chaotic" nature of some energy and commodity futures time series (like heating oil and natural gas, among the others). In particular the sensitive dependence on...
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