Investing for the Long Run. (arXiv:1705.03929v1 [q-fin.PM])
This paper studies long term investing by an investor that maximizes either expected utility from terminal wealth or from consumption. We introduce the concepts of a generalized stochastic discount...
View ArticleMurphy Diagrams: Forecast Evaluation of Expected Shortfall....
Motivated by the Basel 3 regulations, recent studies have considered joint forecasts of Value-at-Risk and Expected Shortfall. A large family of scoring functions can be used to evaluate forecast...
View ArticleCalibration and Filtering of Exponential L\'evy Option Pricing Models....
The accuracy of least squares calibration using option premiums and particle filtering of price data to find model parameters is determined. Derivative models using exponential L\'evy processes are...
View ArticleOptimal R\'enyi Entropy Portfolios. (arXiv:1705.05666v1 [q-fin.PM])
Accounting for the non-normality of asset returns remains challenging in robust portfolio optimization. In this paper, we tackle this problem by assessing the risk of the portfolio through the "amount...
View ArticleA Novel Approach to Quantification of Model Risk for Practitioners....
Models continue to increase their already broad use across industry as well as their sophistication. Worldwide regulation oblige financial institutions to manage and address model risk with the same...
View ArticleHierarchical organization of H. Eugene Stanley scientific collaboration...
By mapping the most advanced elements of the contemporary social interactions, the world scientific collaboration network develops an extremely involved and heterogeneous organization. Selected...
View ArticleContinuous time mean-variance portfolio selection with nonlinear wealth...
This paper concerns the continuous time mean-variance portfolio selection problem with a special nonlinear wealth equation. This nonlinear wealth equation has nonsmooth random coefficients and the dual...
View ArticleBanks as Tanks: A Continuous-Time Model of Financial Clearing....
We present a simple model of clearing in financial networks in continuous time. In the model, firms (banks) are represented as reservoirs (tanks) with liquid (money) flowing in and out. This approach...
View ArticleAnalytic techniques for option pricing under a hyperexponential L\'{e}vy...
We develop series expansions in powers of $q^{-1}$ and $q^{-1/2}$ of solutions of the equation $\psi(z) = q$, where $\psi(z)$ is the Laplace exponent of a hyperexponential L\'{e}vy process. As a direct...
View ArticleSupply and Shorting in Speculative Markets. (arXiv:1705.05882v1 [q-fin.MF])
We propose a continuous-time model of trading among risk-neutral agents with heterogeneous beliefs. Agents face quadratic costs-of-carry on their positions and as a consequence, their marginal...
View ArticleApplication of Differential Equations in Projecting Growth Trajectories....
Mathematical method based on a direct or indirect analysis of growth rates is described. It is shown how simple assumptions and a relatively easy analysis can be used to describe mathematically...
View ArticleBayesian Inference of the Multi-Period Optimal Portfolio for an Exponential...
We consider the estimation of the multi-period optimal portfolio obtained by maximizing an exponential utility. Employing Jeffreys' non-informative prior and the conjugate informative prior, we derive...
View ArticleWealth dynamics in a sentiment-driven market. (arXiv:1705.07092v1 [q-fin.TR])
We study dynamics of a simulated world with stock and money, driven by the externally given processes which we refer to as sentiments. The considered sentiments influence the buy/sell stock trading...
View ArticleQuadratic hedging with multiple assets under illiquidity with applications in...
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for...
View ArticleCDS Rate Construction Methods by Machine Learning Techniques....
Regulators require financial institutions to estimate counterparty default risks from liquid CDS quotes for the valuation and risk management of OTC derivatives. However, the vast majority of...
View ArticleConduct Risk - distribution models with very thin Tails. (arXiv:1705.06868v1...
Regulatory requirements dictate that financial institutions must calculate risk capital (funds that must be retained to cover future losses) at least annually. Procedures for doing this have been...
View ArticleOn the Black's equation for the risk tolerance function. (arXiv:1705.07472v1...
We analyze a nonlinear equation proposed by F. Black (1968) for the optimal portfolio function in a log-normal model. We cast it in terms of the risk tolerance function and provide, for general utility...
View ArticleA Dynkin game on assets with incomplete information on the return....
This paper studies a 2-players zero-sum Dynkin game arising from pricing an option on an asset whose rate of return is unknown to both players. Using filtering techniques we first reduce the problem to...
View ArticleCompressing Over-the-Counter Markets. (arXiv:1705.07155v1 [q-fin.GN])
In this paper, we show both theoretically and empirically that the size of over-the-counter (OTC) markets can be reduced without affecting individual net positions. First, we find that the networked...
View ArticleOptimal Dividends in the Dual Risk Model under a Stochastic Interest Rate....
Optimal dividend strategy in dual risk model is well studied in the literatures. But to the best of our knowledge, all the previous works assumes deterministic interest rate. In this paper, we study...
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