Evidence for criticality in financial data. (arXiv:1702.06191v1 [q-fin.ST])
We provide evidence that cumulative distributions of absolute normalized returns for the $100$ American companies with the highest market capitalization, uncover a critical behavior for different time...
View ArticleStructural Change in (Economic) Time Series. (arXiv:1702.06913v1 [q-fin.ST])
Methods for detecting structural changes, or change points, in time series data are widely used in many fields of science and engineering. This chapter sketches some basic methods for the analysis of...
View ArticleRobust Hedging of Options on a Leveraged Exchange Traded Fund....
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...
View ArticleA closed-form representation of mean-variance hedging for additive processes...
We derive an explicit closed-form representation of mean-variance hedging strategies for models whose asset price follows an exponential additive process. Our representation is given in terms of...
View ArticleA generalized public goods game with coupling of individual ability and...
Facing a heavy task, any single person can only make a limited contribution and team cooperation is needed. As one enjoys the benefit of the public goods, the potential benefits of the project are not...
View ArticleTime series momentum and contrarian effects in the Chinese stock market....
This paper concentrates on the time series momentum or contrarian effects in the Chinese stock market. We evaluate the performance of the time series momentum strategy applied to major stock indices in...
View ArticleEconomic inequality and mobility for stochastic models with multiplicative...
In this article, we discuss a dynamical stochastic model that represents the time evolution of income distribution of a population, where the dynamics develop from an interplay of multiple economic...
View ArticleProbability density of lognormal fractional SABR model. (arXiv:1702.08081v1...
Instantaneous volatility of logarithmic return in the lognormal fractional SABR model is driven by the exponentiation of a correlated fractional Brownian motion. Due to the mixed nature of driving...
View ArticleThe short-term price impact of trades is universal. (arXiv:1702.08029v1...
We analyze a proprietary dataset of trades by a single asset manager, comparing their price impact with that of the trades of the rest of the market. In the context of a linear propagator model we find...
View ArticleObligations with Physical Delivery in a Multi-Layered Financial Network....
This paper provides a general framework for modeling financial contagion in a system with obligations in multiple illiquid assets. In so doing, we develop a multi-layered financial network that extends...
View ArticleA Unified Approach for Drawdown (Drawup) of Time-Homogeneous Markov...
Drawdown (resp. drawup) of a stochastic process, also referred as the reflected process at its supremum (resp. infimum), has wide applications in many areas including financial risk management,...
View ArticleSolvency II, or How to Swipe the Downside Risk Under the Carpet....
Under Solvency II the computation of capital requirements is based on value at risk (V@R). V@R is a quantile-based risk measure and neglects extreme risks in the tail. V@R belongs to the family of...
View ArticleRobust and Consistent Estimation of Generators in Credit Risk....
Bond rating Transition Probability Matrices (TPMs) are built over a one-year time-frame and for many practical purposes, like the assessment of risk in portfolios, one needs to compute the TPM for a...
View ArticleInterbank Credit and the Money Manufacturing Process. A Systemic Perspective...
Interbank lending and borrowing occur when financial institutions seek to settle and refinance their mutual positions over time and circumstances. This interactive process involves money creation at...
View ArticleReverse stress testing interbank networks. (arXiv:1702.08744v1 [q-fin.RM])
We reverse engineer dynamics of financial contagion to find the scenario of smallest exogenous shock that, should it occur, would lead to a given final systemic loss. This reverse stress test can be...
View ArticleAre Trump and Bitcoin Good Partners?. (arXiv:1703.00308v1 [q-fin.GN])
During times of extreme market turmoil, it is acknowledged that there is a tendency towards "flight to safety". A strong (weak) safe haven is defined as an asset that has a significant positive...
View ArticleRecovering Linear Equations of XVA in Bilateral Contracts....
In this paper, we investigate conditions to represent derivative price under XVA explicitly. As long as we consider different borrowing/lending rates, XVA problem becomes a non-linear equa- tion and...
View ArticleIncremental computation of block triangular matrix exponentials with...
We study the problem of computing the matrix exponential of a block triangular matrix in a peculiar way: Block column by block column, from left to right. The need for such an evaluation scheme arises...
View ArticleOptimal Investment and Pricing in the Presence of Defaults....
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for...
View ArticleBSDEs with default jump. (arXiv:1612.05681v2 [q-fin.PR] UPDATED)
We study the properties of nonlinear Backward Stochastic Differential Equations (BSDEs) driven by a Brownian motion and a martingale measure associated with a default jump with intensity process...
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