Efficient Pricing of Barrier Options on High Volatility Assets using Subset...
Barrier options are one of the most widely traded exotic options on stock exchanges. They tend to be cheaper than the corresponding vanilla options and better represent investor's beliefs, but have...
View ArticleRobust utility maximization in markets with transaction costs....
We consider a continuous-time market with proportional transaction costs. Under appropriate assumptions we prove the existence of optimal strategies for investors who maximize their worst-case utility...
View ArticleAlgorithmic Trading with Partial Information: A Mean Field Game Approach....
Financial markets are often driven by latent factors which traders cannot observe. Here, we address an algorithmic trading problem with collections of heterogeneous agents who aim to perform...
View ArticleMatching distributions: Recovery of implied physical densities from option...
We introduce a non-parametric method to recover physical probability distributions of asset returns based on their European option prices and some other sparse parametric information. Thus the main...
View ArticleCalibration of Local Volatility Model with Stochastic Interest Rates by...
Long maturity options or a wide class of hybrid products are evaluated using a local volatility type modelling for the asset price S(t) with a stochastic interest rate r(t). The calibration of the...
View ArticleReality-check for Econophysics: Likelihood-based fitting of physics-inspired...
The statistical description and modeling of volatility plays a prominent role in econometrics, risk management and finance. GARCH and stochastic volatility models have been extensively studied and are...
View ArticleDual Moments and Risk Attitudes. (arXiv:1612.03347v2 [q-fin.RM] UPDATED)
In decision under risk, the primal moments of mean and variance play a central role to define the local index of absolute risk aversion. In this paper, we show that in canonical non-EU models dual...
View ArticleA Score-Driven Conditional Correlation Model for Noisy and Asynchronous Data:...
We propose a new multivariate conditional correlation model able to deal with data featuring both observational noise and asynchronicity. When modelling high-frequency multivariate financial...
View ArticleTheoretical and empirical analysis of trading activity. (arXiv:1803.04892v1...
Understanding the structure of financial markets deals with suitably determining the functional relation between financial variables. In this respect, important variables are the trading activity,...
View ArticleA Generalization of the Robust Positive Expectation Theorem for Stock Trading...
The starting point of this paper is the so-called Robust Positive Expectation (RPE) Theorem, a result which appears in literature in the context of Simultaneous Long-Short stock trading. This theorem...
View ArticleCategorizing Variants of Goodhart's Law. (arXiv:1803.04585v1 [cs.AI])
There are several distinct failure modes for overoptimization of systems on the basis of metrics. This occurs when a metric which can be used to improve a system is used to an extent that further...
View ArticleMinimising the expectation value of the procurement cost in electricity...
In this paper, we formulate a method for minimising the expectation value of the procurement cost of electricity in two popular spot markets: {\it day-ahead} and {\it intra-day}, under the assumption...
View ArticlePathwise moderate deviations for option pricing. (arXiv:1803.04483v1 [q-fin.MF])
We provide a unifying treatment of pathwise moderate deviations for models commonly used in financial applications, and for related integrated functionals. Suitable scaling allows us to transfer these...
View ArticleStochastic Dynamic Utilities and Inter-Temporal Preferences....
We propose an axiomatic approach which economically underpins the representation of dynamic preferences in terms of a stochastic utility function, sensitive to the information available to the decision...
View ArticleStock Price Prediction using Principle Components. (arXiv:1803.05075v1...
The literature provides strong evidence that stock prices can be predicted from past price data. Principal component analysis (PCA) is a widely used mathematical technique for dimensionality reduction...
View ArticleAn Endogenous Mechanism of Business Cycles. (arXiv:1803.05002v1 [q-fin.GN])
This paper suggests that business cycles may be a manifestation of coupled economy-market dynamics and describes a mechanism that can generate economic fluctuations consistent with observed business...
View ArticlePractical volume computation of structured convex bodies, and an application...
We examine volume computation of general-dimensional polytopes and more general convex bodies, defined as the intersection of a simplex by a family of parallel hyperplanes, and another family of...
View ArticleTechnical Uncertainty in Real Options with Learning. (arXiv:1803.05831v1...
We introduce a new approach to incorporate uncertainty into the decision to invest in a commodity reserve. The investment is an irreversible one-off capital expenditure, after which the investor...
View ArticleOutperformance and Tracking: Dynamic Asset Allocation for Active and Passive...
Portfolio management problems are often divided into two types: active and passive, where the objective is to outperform and track a preselected benchmark, respectively. Here, we formulate and solve a...
View ArticleOptimal liquidity-based trading tactics. (arXiv:1803.05690v1 [q-fin.TR])
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic...
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