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.
This paper shows a buy-and-hold strategy is asymptotically log-optimal for a market with a dominant asset.
We take a look the changes of different asset prices over variable periods, using both traditional and spectral methods, and discover universality phenomena which hold (in some cases) across asset classes.
Study finds stock selection ability of Chinese mutual funds is better than asset allocation ability.
Model shows how financial contagion spreads through complex interdependencies.
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize expected returns under quadratic costs on inventories and trading rates. The un…
Given a new candidate asset represented as a time series of returns, how should a quantitative investment manager be thinking about assessing its usefulness? This is a key qualitative question inherent to the investment process which we aim to make precise. We argue that the usefulness of an asset can only be determine…
This paper analyzes DRL strategies in finance, revealing unique trading patterns and performance differences.
Test-asset construction affects factor model performance.
Study minimizes market inefficiency in systemic economies.
Algorithm ranks assets in fluctuating markets.
The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the risky assets (the endowed asset) are infinite, and transaction costs involving …
Corporate transparency reduces investors' disposition effect by increasing confidence in holding profitable and losing stocks.
Study uses RL to optimize risky vs. risk-free asset allocation.
A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not assumed. Via a natural market viability assumption, namely, absence of arbitrages of t…
A financial market model with general semimartingale asset-price processes and where agents can only trade using no-short-sales strategies is considered. We show that wealth processes using continuous trading can be approximated very closely by wealth processes using simple combinations of buy-and-hold trading. This ap…
I show the equivalence between a model of financial contagion and the threshold model of global cascades proposed by Watts (2002). The model financial network comprises banks that hold risky external assets as well as interbank assets. It is shown that a simple threshold model can replicate the size and the frequency o…
Representative investors whose behaviour is modelled by a deterministic finite automaton generate complexity both in the time series of each asset and in the cross-sectional correlation when the rule governing their behaviour is schizophrenic, meaning the investor must hold multiple seemingly contradictory beliefs simu…
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 …
We consider a Black-Scholes market in which a number of stocks and an index are traded. The simplified Capital Asset Pricing Model is the conjunction of the usual Capital Asset Pricing Model, or CAPM, and the statement that the appreciation rate of the index is equal to its squared volatility plus the interest rate. (T…
Survival strategy for crypto firms in bear markets using BTC-to-sats payments rail.
We study analytically and numerically Minority Games in which agents may invest in different assets (or markets), considering both the canonical and the grand-canonical versions. We find that the likelihood of agents trading in a given asset depends on the relative amount of information available in that market. More s…
We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging error under the criterion of variance-optimality and provide tractable formulas u…
The paper shows how cross-ownership increases equity correlations during financial crises.
In this article, we established a stock market model based on agents' investing mentality. The agents decide whether to purchase the shares at the probability, according to their anticipation of the market's behaviors. The expectation of the amount of shares they want to buy is directly proportional to the value of ass…
Optimal portfolios are found for a wide range of utility functions under hyperbolic returns.
Hedge funds have long been viewed as a veritable "black box" of investing since outsiders may never view the exact composition of portfolio holdings. Therefore, the ability to estimate an informative set of asset weights is highly desirable for analysis. We present a compositional state space model for estimation of an…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the contract's maturity the contract is perfectly hedged. We derive both the optimal hol…
The standard asset pricing models (the CCAPM and the Epstein-Zin non-expected utility model) counterintuitively predict that equilibrium asset prices can rise if the representative agent's risk aversion increases. If the income effect, which implies enhanced saving as a result of an increase in risk aversion, dominates…
Diversification return is an incremental return earned by a rebalanced portfolio of assets. The diversification return of a rebalanced portfolio is often incorrectly ascribed to a reduction in variance. We argue that the underlying source of the diversification return is the rebalancing, which forces the investor to se…
Modern financial networks exhibit a high degree of interconnectedness and determining the causes of instability and contagion in financial networks is necessary to inform policy and avoid future financial collapse. In the American Economic Review, Elliott, Golub and Jackson proposed a simple model for capturing the dyn…
Paper improves asset allocation using machine learning for regime detection.
In practice daily volatility of portfolio returns is transformed to longer holding periods by multiplying by the square-root of time which assumes that returns are not serially correlated. Under this assumption this procedure of scaling can also be applied to contributions to volatility of the assets in the portfolio. …
This paper systematizes knowledge on synthetic assets in crypto.
Semi-static trading strategies make frequent appearances in mathematical finance, where dynamic trading in a liquid asset is combined with static buy-and-hold positions in options on that asset. We show that the space of outcomes of such strategies can have very poor closure properties when all European options for a f…
The conventional wisdom of mean-variance (MV) portfolio theory asserts that the nature of the relationship between risk and diversification is a decreasing asymptotic function, with the asymptote approximating the level of portfolio systematic risk or undiversifiable risk. This literature assumes that investors hold an…
In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival times of a Poisson process. The criterion to be optimised consists in maximising…
This paper models financial contagion with endogenously determined market liquidity.
By exploiting a bipartite network representation of the relationships between mutual funds and portfolio holdings, we propose an indicator that we derive from the analysis of the network, labelled the Average Commonality Coefficient (ACC), which measures how frequently the assets in the fund portfolio are present in th…
New shrinkage estimator for GMV portfolio reduces risk in high-dimensional asset settings.
Complex contagion model explains financial fire sales through continuous asset prices.
New process explains asset volatility patterns.
In this paper, we develop a theory of market crashes resulting from a deleveraging shock. We consider two representative investors in a market holding different opinions about the public available information. The deleveraging shock forces the high confidence investors to liquidate their risky assets to pay back their …
Many new models for measuring financial contagion have been presented recently. While these models have not been specified for investment funds directly, there are many similarities that could be explored to extend the models. In this work we explore ideas developed about financial contagion to create a network of inve…
We consider the optimal trade execution strategies for a large portfolio of single stocks proposed by Almgren (2003). This framework accounts for a nonlinear impact of trades on average market prices. The results of Almgren (2003) are based on the assumption that no shares of assets per unit of time are trade at the be…
Systemic risk arises as a multi-layer network phenomenon. Layers represent direct financial exposures of various types, including interbank liabilities, derivative- or foreign exchange exposures. Another network layer of systemic risk emerges through common asset holdings of financial institutions. Strongly overlapping…
The study proposes a framework to assess sustainability of firms using fund-level classifications and portfolio holdings.
Study asset price bubbles in markets with short sales prohibitions and model uncertainty.
By monitoring the time evolution of the most liquid Futures contracts traded globally as acquired using the Bloomberg API from 03 January 2000 until 15 December 2014 we were able to forecast the S&P 500 index beating the Buy and Hold trading strategy. Our approach is based on convolution computations of 42 of the most …