Credit Risk Meets Random Matrices: Coping with Non-Stationary Asset...
We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the...
View ArticleContinuous partition-of-unity copulas and their application to risk...
In this paper we discuss a natural extension of infinite discrete partition-of-unity copulas to continuous partition of copulas which were recently introduced in the literature, with possible...
View ArticleOptimal investment-consumption problem post-retirement with a minimum...
We study the optimal investment-consumption problem for a member of defined contribution plan during the decumulation phase. For a fixed annuitization time, to achieve higher final annuity, we consider...
View ArticleTesting a Goodwin model with general capital accumulation rate....
We perform econometric tests on a modified Goodwin model where the capital accumulation rate is constant but not necessarily equal to one as in the original model (Goodwin, 1967). In addition to this...
View ArticleA comment on 'Testing Goodwin: growth cycles in ten OECD countries'....
We revisit the results of Harvie (2000) and show how correcting for a reporting mistake in some of the estimated parameter values leads to significantly different conclusions, including realistic...
View ArticleComparing Asset Pricing Models: Distance-based Metrics and Bayesian...
In light of the power problems of statistical tests and undisciplined use of alpha-based statistics to compare models, this paper proposes a unified set of distance-based performance metrics, derived...
View ArticleGeneralized Information Ratio. (arXiv:1803.01381v1 [q-fin.PM])
This paper proposes the Generalized Information Ratio (GIR) to evaluate the performance of active portfolios under misspecified models. Motivated by the theoretical link between abnormal returns and...
View ArticleA Term Structure Model for Dividends and Interest Rates. (arXiv:1803.02249v1...
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly...
View ArticleKinetic models for optimal control of wealth inequalities....
We introduce and discuss optimal control strategies for kinetic models for wealth distribution in a simple market economy, acting to minimize the variance of the wealth density among the population....
View ArticleModelling stock correlations with expected returns from investors....
Stock correlations is crucial to asset pricing, investor decision-making, and financial risk regulations. However, microscopic explanation based on agent-based modeling is still lacking. We here...
View ArticleA Dynamic Model of Central Counterparty Risk. (arXiv:1803.02012v1 [q-fin.RM])
We introduce a dynamic model of the default waterfall of derivatives CCPs and propose a risk sensitive method for sizing the initial margin (IM), and the default fund (DF) and its allocation among...
View ArticleWhy Black Swan events must occur - an ontological investigation....
We develop a first-order deductive system to show that the occurrence of Black Swan events is implied by their definition. It follows as a corollary of our theorem that any computational model of...
View ArticleQuantile optimization under derivative constraint. (arXiv:1803.02546v1...
This paper studies a new type of quantile optimization problems arising from insurance contract design models. This type of optimization problems is characterized by a constraint of...
View ArticlePricing index options by static hedging under finite liquidity....
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging...
View ArticleClassification of crypto-coins and tokens from the dynamics of their power...
We empirically verify that the market capitalisations of coins and tokens in the cryptocurrency universe follow power law distributions with significantly different values, with the tail exponent...
View ArticleOptimal Portfolio Design for Statistical Arbitrage in Finance....
In this paper, the optimal mean-reverting portfolio (MRP) design problem is considered, which plays an important role for the statistical arbitrage (a.k.a. pairs trading) strategy in financial markets....
View ArticleDoes the time horizon of the return predictive effect of investor sentiment...
Behavioral theories posit that investor sentiment exhibits predictive power for stock returns, whereas there is little study have investigated the relationship between the time horizon of the...
View ArticleThe nested structural organization of the worldwide trade multi-layer...
Nestedness has traditionally been used to detect assembly patterns in meta-communities and networks of interacting species. Attempts have also been made to uncover nested structures in international...
View ArticleBayesian mean-variance analysis: Optimal portfolio selection under parameter...
The paper solves the problem of optimal portfolio choice when the parameters of the asset returns distribution, like the mean vector and the covariance matrix are unknown and have to be estimated by...
View ArticleBehavioural effects on XVA. (arXiv:1803.03477v1 [q-fin.PR])
Bank behaviour is important for pricing XVA because it links different counterparties and thus breaks the usual XVA pricing assumption of counterparty independence. Consider a typical case of a bank...
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