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.
Study on Leverage Ratio in European banks during financial crises.
Derivatives impact U.S. banking sector's systemic risk, but loan and leverage ratios are more significant.
The paper finds optimal ways to combine ETFs to minimize costs for investors.
When trading incurs proportional costs, leverage can scale an asset's return only up to a maximum multiple, which is sensitive to its volatility and liquidity. In a model with one safe and one risky asset, with constant investment opportunities and proportional costs, we find strategies that maximize long term returns …
This paper provides a framework for modeling the financial system with multiple illiquid assets when liquidation of illiquid assets is caused by failure to meet a leverage requirement. This extends the network model of Cifuentes, Shin & Ferrucci (2005) which incorporates a single asset with fire sales and capital adequ…
Investors can enhance their portfolios by strategically using LETFs, especially with dynamic strategies.
Average Oracle outperforms DCC+NLS in portfolio optimization.
We use bank-level balance sheet data from 2005 to 2010 to study interactions within the banking system of five emerging countries: Argentina, Brazil, Mexico, South Africa, and Taiwan. For each country we construct a financial network based on the leverage ratio dependence between each pair of banks, and find results th…
Featurization improves density ratio estimation for complex data.
We revisit the ``Smile Dynamics'' problem, which consists in relating the implied leverage (i.e. the correlation of the at-the-money volatility with the returns of the underlying) and the skew of the option smile. The ratio between these two quantities, called ``Skew-Stickiness Ratio'' (SSR) by Bergomi (Smile Dynamics …
Investment strategy using fractional Kelly portfolios for better growth expectations.
Enhances investment performance by leveraging cross-market information.
Study analyzes factors affecting capital adequacy in Bangladesh's banks.
Paper tackles unbounded density ratio estimation for covariate shift adaptation.
Paper uses LLMs for sector allocation, showing better returns.
Perpetual futures offer leverage without maturity, with prices influenced by funding rates.
The study predicts bankruptcy in Indian companies using financial ratios.
Paper proposes a novel approach to density ratio estimation using projection pursuit.
This paper studies the empirical tracking performance of leveraged ETFs on gold, and their price relationships with gold spot and futures. For tracking the gold spot, we find that our optimized portfolios with short-term gold futures are highly effective in replicating prices. The market-traded gold ETF (GLD) also exhi…
New method estimates density ratio for well-separated distributions using multi-class logistic regression.
We present a discriminative clustering approach in which the feature representation can be learned from data and moreover leverage labeled data. Representation learning can give a similarity-based clustering method the ability to automatically adapt to an underlying, yet hidden, geometric structure of the data. The pro…
Proposes a robust method for predicting missing outcomes in covariate shift adaptation.
The importance of the global financial system cannot be exaggerated. When a large financial institution becomes problematic and is bailed out, that bank is often claimed as "too big to fail". On the other hand, to prevent bank's failure, regulatory authorities adopt the Prompt Corrective Action (PCA) against a bank tha…
Paper uses Transformers to predict intraday volume ratio with high accuracy.
Paper tackles informative labels in semi-supervised learning, proposing debiasing methods.
Credit expansion led to stronger household leverage cycles during the U.S. business cycle.
Recent research has used margin theory to analyze the generalization performance for deep neural networks (DNNs). The existed results are almost based on the spectrally-normalized minimum margin. However, optimizing the minimum margin ignores a mass of information about the entire margin distribution, which is crucial …
Modeling bank leverage dynamics to understand systemic risk in financial markets.
Paper introduces lexical ratio to measure portfolio diversification.
A macroeconomic model based on the economic variables (i) assets, (ii) leverage (defined as debt over asset) and (iii) trust (defined as the maximum sustainable leverage) is proposed to investigate the role of credit in the dynamics of economic growth, and how credit may be associated with both economic performance and…
It had been believed in the conventional practice that the risk of a bank going bankrupt is lessened in a straightforward manner by transferring the risk of loan defaults. But the failure of American International Group in 2008 posed a more complex aspect of financial contagion. This study presents an extension of the …
The growth of the exhange-traded fund (ETF) industry has given rise to the trading of options written on ETFs and their leveraged counterparts {(LETFs)}. We study the relationship between the ETF and LETF implied volatility surfaces when the underlying ETF is modeled by a general class of local-stochastic volatility mo…
This work characterizes the fundamental limit of network pruning using statistical dimension and convex geometry.
I unravel the basic long run dynamics of the broker call money market, which is the pile of cash that funds margin loans to retail clients (read: continuous time Kelly gamblers). Call money is assumed to supply itself perfectly inelastically, and to continuously reinvest all principal and interest. I show that the rela…
We consider structural credit modeling in the important special case where the log-leverage ratio of the firm is a time-changed Brownian motion (TCBM) with the time-change taken to be an independent increasing process. Following the approach of Black and Cox, one defines the time of default to be the first passage time…
In modern portfolio theory, the balancing of expected returns on investments against uncertainties in those returns is aided by the use of utility functions. The Kelly criterion offers another approach, rooted in information theory, that always implies logarithmic utility. The two approaches seem incompatible, too loos…
Enhances AI models with human feedback for noisy data.
A novel kernel-based test detects equality versus singularity of two probability measures.
Investigate using LETFs to outperform benchmarks, finding them more likely to succeed.
We study time reversal, last passage time, and -transform of linear diffusions. For general diffusions with killing, we obtain the probability density of the last passage time to an arbitrary level and analyze the distribution of the time left until killing after the last passage time. With these tools, we develop a…
SPRT-TANDEM improves sequential classification accuracy with fewer samples.
The paper explores using historical data to improve clinical trial analysis by optimizing covariate weights.
Smart beta, also known as strategic beta or factor investing, is the idea of selecting an investment portfolio in a simple rule-based manner that systematically captures market inefficiencies, thereby enhancing risk-adjusted returns above capitalization-weighted benchmarks. We explore the idea of applying a smart strat…
MCD reformulates conditional density estimation into binary classification.
We study online optimization in a setting where an online learner seeks to optimize a per-round hitting cost, which may be non-convex, while incurring a movement cost when changing actions between rounds. We ask: \textit{under what general conditions is it possible for an online learner to leverage predictions of futur…
Large language models improve futures market factor models in China.
Unified framework for DRO using OT with constraints.
The major perspective of this paper is to provide more evidence into the empirical determinants of capital structure adjustment in different macroeconomics states by focusing and discussing the relative importance of firm-specific and macroeconomic characteristics from an alternative scope in U.S. This study extends th…