In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for hedging derivatives assuming that a hedger should not always rely on trading existin…
On-device research index
arXiv research
A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
168,657 papers · 148 categories
Trend · papers per month
48 results for “Financial Instrument”
We contrast Arbitrage Pricing Theory (APT), the theoretical basis for the development of financial instruments, with a dynamical picture of an interacting market, in a simple setting. The proliferation of financial instruments apparently provides more means for risk diversification, making the market more efficient and…
Improves financial instrument pricing using neural networks.
problem Financial instrument pricing within Black-Karasinski model.
method Enhances path-integral approximation with neural networks.
result Demonstrates superior outcomes for multiple calibrations.
Neural Optimal Stopping Boundaryq-fin.PR
Neural networks optimize stopping boundaries in financial instruments.
problem Optimizing stopping boundaries in financial instruments.
method Deep neural networks and empirical risk minimization for parameterizing stopping boundaries.
result Proved existence of stopping boundary under natural assumptions.
The paper presents new machine learning methods: signal composition, which classifies time-series regardless of length, type, and quantity; and self-labeling, a supervised-learning enhancement. The paper describes further the implementation of the methods on a financial search engine system using a collection of 7,881 …
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect competition, where full information is available to all market participants, the equilibr…
A new oscillator measures trending behavior of financial instruments.
problem Detecting underlying deterministic components in financial market prices.
method Financial market geometry and tube oscillator derived from past history.
result Simple trading strategy based on tube oscillator leads to consistent positive returns.
Recently the interest of researchers has shifted from the analysis of synchronous relationships of financial instruments to the analysis of more meaningful asynchronous relationships. Both of those analyses are concentrated only on Pearson's correlation coefficient and thus intraday lead-lag relationships associated wi…
Financial market created for wellbeing indices to mitigate socioeconomic risks.
problem Risk mitigation in financial indices of socioeconomic wellbeing.
method Developed new quantitative measure, created financial market, and implemented insurance instruments.
result Optimal portfolio weights and efficient frontiers for wellbeing indices.
Dynamic State Tamenessmath.PR
An extension of the idea of state tameness is presented in a dynamic framework. The proposed model for financial markets is rich enough to provide analytical tools that are mostly obtained in models that arise as the solution of SDEs with deterministic coefficients. In the presented model the augmentation by a shadow s…
A crypto coin designed to provide a stabilization instrument backed up by minded like financial investments instruments to maintain the purchase value of savings across time, in order to construct new tools for unstable economies.
Composing Ensembles of Instrument-Model Pairs for Optimizing Profitability in Algorithmic Tradingq-fin.TR
Paper optimizes trading profits by predicting price direction using ensemble models.
problem Predicting short-term price movements in financial markets.
method Developed a two-layer ensemble architecture optimized through grid search.
result Improvement of 20% over benchmark strategies.
Model for hedging price and quantity risks in electricity markets.
problem Hedging risks for energy retailers in a regulated electricity market.
method Closed-form solution for optimal portfolio using financial instruments based on price and weather indexes.
result Closed-form solution for mean-var model in discrete setting without distributional assumptions.
The paper tackles temporal coverage bias in financial panel data, proposing a structuring framework to correct for incomplete histories.
problem Incomplete histories of financial instruments lead to biased panel data.
method Formalizes the problem and proposes a coverage-aware structuring framework using structured metadata and an availability matrix.
result The framework reveals substantial distortions in return dynamics and volatility when naive temporal alignment is used.
We introduce, in continuous time, an axiomatic approach to assign to any financial position a dynamic ask (resp. bid) price process. Taking into account both transaction costs and liquidity risk this leads to the convexity (resp. concavity) of the ask (resp. bid) price. Time consistency is a crucial property for dynami…
Financial markets provide a natural quantitative lab for understanding some of the most advanced human behaviours. Among them is the use of mathematical tools known as financial instruments. Besides money, the two most fundamental financial instruments are bonds and equities. More than 30 years ago Mehra and Prescott f…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random markets using techniques borrowed from statistical mechanics of disordered systems. …
Paper uses Chebyshev Tensors for accurate dynamic sensitivities and ISDA SIMM computation.
problem Computing dynamic sensitivities and initial margin for financial instruments.
method Uses Chebyshev Tensors in Monte Carlo simulations to compute dynamic sensitivities and ISDA SIMM.
result High accuracy and computational gains for FX swaps and Spread Options.
Deep Graph Convolutional Reinforcement Learning for Financial Portfolio Management -- DeepPocketq-fin.CP
DeepPocket uses graph convolutional reinforcement learning for better financial portfolio management.
problem Maximizing return on investment while managing risk in correlated financial assets.
method Graph convolutional reinforcement learning framework with feature extraction, local information collection, and actor-critic reinforcement learning.
result DeepPocket outperformed market indexes on five real-life datasets over three investment periods, including during the Covid-19 crisis.
Deep Bellman Hedgingq-fin.CP
Deep Bellman Hedging uses reinforcement learning to optimize financial portfolio hedging.
problem Optimizing financial portfolio hedging with derivatives and trading frictions.
method Actor-critic reinforcement learning algorithm with continuous state and action spaces.
result Trained model provides optimal hedge for any initial portfolio and market state.
Financial derivatives based on road travel times for hedging and pricing.
problem Market risk in crypto and banking sectors.
method Modeling travel time data with CARMA models and applying risk-neutral pricing.
result Derivatives pricing based on travel time and its volatility.
Filtering in a hazard rate change-point model with financial and life-insurance applicationsq-fin.MF
The paper develops a filtering framework for estimating hazard rates with jumps in financial and insurance applications.
problem Estimating hazard rates with unobservable change-points in financial and insurance contexts.
method Continuous-time filtering framework using progressive enlargement of filtration, stochastic differential equations, and sensitivity analysis.
result Explicit formula for survival probability conditional on partial information.
Proposes hedging strategies for mortgage prepayment risk.
problem Mortgage prepayment risk and its impact on financial institutions.
method Develops a model incorporating non-linear financial instruments for hedging.
result Shows non-linear risk in prepayment options and validates a functional form of prepayments.
Study evaluates risk in options using volatility surface projections.
problem Risk assessment of options due to their non-linear price behavior and volatility fluctuations.
method Parametric surface projection method for implied volatility.
result Enhanced risk evaluation through dynamic volatility surface analysis.
Novel CMG framework improves financial sentiment forecasting.
problem Challenges in short-term sentiment forecasting of financial OHLC data.
method Integrates chaos theory, Markov chains, and Gaussian processes with transformer models.
result Consistently outperforms traditional models in accuracy and efficiency.
Arbitrage strategyq-fin.GN
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless profit would result in an instantaneous movement of prices of certain financial ins…
This paper improves financial derivative pricing by incorporating multiple hedging instruments.
problem Valuation of financial derivatives with multiple hedging instruments.
method Deep hedging algorithm and reinforcement learning to solve global hedging problems.
result Including options as hedging instruments can significantly decrease equal risk prices and market incompleteness.
The paper analyzes sterling bills of exchange during the first globalization, revealing their global financial role.
problem Understanding the global financial role of sterling bills of exchange during the first globalization.
method Descriptive statistics and network analysis of a unique data set of 23,493 bills re-discounted by the Bank of England in 1906.
result Sterling bills of exchange had a truly global dimension and were crucial for overcoming information asymmetries.
The definition of deposit substitutes in Philippine tax law fails to consider the maturity of a debt instrument. This makes it possible for long-term bonds to be considered as deposit substitutes if they meet the 20-lender rule, taxable at 20% final tax. However, long-term debt instruments cannot realistically function…
Two models are identified for robust cross-impact analysis.
problem Developing and validating cross-impact models that fit data and are well-behaved.
method Classified cross-impact models according to desirable properties and evaluated them on three asset classes.
result Only one model satisfies all desirable properties and is suitable for applications.
A new method for computing Greeks without bias, improving stability.
problem Inaccurate and unstable computation of second order Greeks (like Gamma) in financial instruments.
method Apply Chebyshev interpolation techniques to finite differences for improved stability.
result Improved stability and accuracy in computing spot Greeks without bias.
Study introduces a new copula-based measure for financial asset cointegration.
problem Traditional correlation coefficient's limitations in measuring financial asset relationships.
method Utilizes copulas to measure dependence among financial asset returns.
result Enhanced stability and informativeness in measuring financial asset relationships.
Study proposes a new financial market representation for machine learning.
problem Complex analysis of financial time series for machine learning.
method Volume-price-based statistical approach.
result Proposed method outperforms price levels-based method on liquid markets.
Elasticity theory of structuringq-fin.GN
Financial derivatives have often been criticized as casino-style betting instruments. It turns out that many naive ways of making them are indeed equivalent to gambling. Fortunately, this inadvertent effect can be understood and prevented. We present a theory of product design which achieves that.
This paper proposes a novel adaptive algorithm for the automated short-term trading of financial instrument. The algorithm adopts a semantic sentiment analysis technique to inspect the Twitter posts and to use them to predict the behaviour of the stock market. Indeed, the algorithm is specifically developed to take adv…
At present, cryptocurrencies have become a global phenomenon in financial sectors as it is one of the most traded financial instruments worldwide. Cryptocurrency is not only one of the most complicated and abstruse fields among financial instruments, but it is also deemed as a perplexing problem in finance due to its h…
Multifractal cross-correlations between the World Oil and other Financial Markets in 2012-2017q-fin.ST
Statistical and multiscaling characteristics of WTI Crude Oil prices expressed in US dollar in relation to the most traded currencies as well as to gold futures and to the E-mini SP500 futures prices on 5 min intra-day recordings in the period January 2012 - December 2017 are studied. It is shown that in most of th…
Study of common financial data patterns across stocks.
problem Understanding common patterns in financial data.
method Analysis of stock price data from multiple exchanges.
result Identification of various stylized empirical facts in financial data.
We present a novel approach to the pricing of financial instruments in emission markets, for example, the EU ETS. The proposed structural model is positioned between existing complex full equilibrium models and pure reduced form models. Using an exogenously specified demand for a polluting good it gives a causal explan…
Modeling trading volume curves using hierarchical Poisson processes.
problem Predicting trading volume curves for financial instruments.
method Hierarchical Poisson process model based on hierarchical Dirichlet process with MCMC algorithm.
result Demonstrated scalability on NASDAQ stocks, including Apple.
After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the authorities deem the institution to be under-capitalized. This paper discusses this…
Reinforcement learning improves option pricing and hedging accuracy.
problem Improving financial instrument pricing and hedging accuracy.
method Q-Learning Black Scholes approach applied to option pricing and hedging.
result The reinforcement learning model accurately estimates option prices and hedging strategies under various volatility and moneyness levels.
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes rational decisions that would absolutely minimize the risk. Here we show that, for…
Hamiltonian and Potentials in Derivative Pricing Models: Exact Results and Lattice Simulationscond-mat.soft
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian formulation. We show here some applications of these methods for various potentials, whic…
LLMs prefer Bitcoin under crisis frames, affecting financial decisions.
problem Testing whether LLMs have built-in biases towards specific financial assets.
method Developed a three-level audit protocol to examine Bitcoin's representation and influence in LLMs.
result An identifiable internal feature in LLMs can be perturbed to move financial choices, but only within measurable limits.
This paper simplifies hedge ratios in financial models using pathwise algorithmic differentiation.
problem Expensive and unstable computation of hedge ratios from pathwise sensitivities.
method Develops reduced stochastic hedge ratios of the form φ_j^r = Σ_j^r ξ_j^q X_q, retaining sensitivity tensor through empirical averages.
result Two coefficient criteria are introduced to minimize pathwise residuals and satisfy moment equations.
The author seeks to develop a model to alter the bid-offer spread, currently quoted by market makers, that varies with the market and trading conditions. The dynamic nature of financial markets and trading, as with the rest of social sciences, where changes can be observed and decisions can be made by participants to i…
To define oscillatory movements of securities market, we put in the non-local extension of Ito- equation for wavelet-images of random processes. It is proposed an algorithm of creation of evolutionary equation and a model of prediction of the most probable price movement path. It is carried out experimental validation …