Improved deep learning performance in financial markets by using rank space.
problem High volatility and low signal-to-noise ratio in equity market dynamics.
method Transformed equity market data from name space to rank space, enabling better learning by DNNs.
result DNNs achieve superior performance in statistical arbitrage in rank space compared to name space.
We consider the problem of robustly maximizing the growth rate of investor wealth in the presence of model uncertainty. Possible models are all those under which the assets' region E and instantaneous covariation c are known, and where additionally the assets are stable in that their occupancy time measures converg…
Geoeconomic analysis of venture capital portfolios reveals key emerging tech domains and countries.
problem Quantifying geoeconomic power and technological sovereignty through venture capital data.
method Economic complexity methods applied to venture capital portfolios and RVA metrics.
result Cloud Computing, Cybersecurity Tools, and Medtech have the highest concentration of specialization among high-GCI countries.
Study shows how market firm capitalization models converge to stochastic PDE solutions.
problem Understanding convergence of rank-based models with common noise to stochastic PDE solutions.
method Analysis of mean field limit, martingale problem, and pathwise entropy solutions.
result Empirical cumulative distribution function converges to solution of a stochastic PDE under certain conditions.
Proposes a diagnostic method to evaluate factor models using cap-axis integrals.
problem Improving factor model evaluation in low-dimensional spaces.
method Lifts pricing errors into a bridge-alpha curve along the market-capitalization rank axis.
result The cap-axis norm is distinct from Sharpe gain and size exposure.
Proposes a diagnostic method to evaluate factor models using cap-axis integrals.
problem Improving factor model evaluation for low-dimensional models.
method Lifts pricing errors into a bridge-alpha curve along the market-capitalization rank axis.
result The cap-axis norm is distinct from Sharpe gain and size exposure.
Cryptocurrencies are ranked for efficiency using a new Complexity-Entropy Plane.
problem Evaluating the efficiency of cryptocurrencies using traditional financial metrics.
method Developed a Binary Complexity-Entropy Plane (BiCEP) to analyze daily price fluctuations of major cryptocurrencies.
result Only Shiba Inu (SHIB) is significantly inefficient, while most cryptocurrencies operate in close-to-efficient conditions.
We study a mean-field version of rank-based models of equity markets such as the Atlas model introduced by Fernholz in the framework of Stochastic Portfolio Theory. We obtain an asymptotic description of the market when the number of companies grows to infinity. Then, we discuss the long-term capital distribution. We r…
Capital distribution curve is defined as log-log plot of normalized stock capitalizations ranked in descending order. The curve displays remarkable stability over periods of time. Theory of exchangeable distributions on set partitions, developed for purposes of mathematical genetics and recently applied in non-parametr…
The paper analyzes a five-factor capital market model and facilitates exact simulation.
problem Analyzing and simulating a five-factor capital market model.
method Using a Vasicek interest rate model, mean-reverting excess return, and realized inflation with expectation, the paper derives the necessary distributional results and describes practical methods to overcome rank deficiency.
result Exact simulation from the model can be achieved by sampling from a seven-dimensional normal distribution.
Open markets are a subset of equity markets with fixed top stocks, changing over time.
problem Understanding the dynamics and characteristics of open markets.
method Analyzing the similarities and differences between open markets and closed equity markets, and exploring specific topics like CAPM and portfolio construction.
result The equivalence of market viability and the existence of a numeraire portfolio holds in open markets, similar to closed markets.
We study Atlas-type models of equity markets with local characteristics that depend on both name and rank, and in ways that induce a stable capital distribution. Ergodic properties and rankings of processes are examined with reference to the theory of reflected Brownian motions in polyhedral domains. In the context of …
A technique from stochastic portfolio theory [Fernholz, 1998] is applied to analyse equity returns of Small, Mid and Large cap portfolios in an emerging market through periods of growth and regional crises, up to the onset of the global financial crisis. In particular, we factorize portfolios in the South African marke…
Research tackles investor confusion in ESG rankings, offering tailored strategies.
problem Widespread confusion among investors regarding ESG rankings.
method Developed ESG ensemble strategies, integrated ESG scores into RL model, proposed Double-Mean-Variance model, introduced ESG-adjusted CAPMs.
result Optimized portfolios that balance financial returns and ESG-focused outcomes.
It has been widely observed that capitalization-weighted indexes can be beaten by surprisingly simple, systematic investment strategies. Indeed, in the U.S. stock market, equal-weighted portfolios, random-weighted portfolios, and other naive, non- optimized portfolios tend to outperform a capitalization-weighted index …
We study the limiting behaviour of the empirical measure of a system of diffusions interacting through their ranks when the number of diffusions tends to infinity. We prove that the limiting dynamics is given by a McKean-Vlasov evolution equation. Moreover, we show that in a wide range of cases the evolution of the cum…
The financial crisis has dramatically demonstrated that the traditional approach to apply univariate monetary risk measures to single institutions does not capture sufficiently the perilous systemic risk that is generated by the interconnectedness of the system entities and the corresponding contagion effects. This has…
New model predicts stock performance in large equity markets.
problem Predicting stock performance in large equity markets over long time horizons.
method Rank-based volatility stabilized models calibrated to empirical data.
result The model exhibits relative arbitrage and statistically fits empirical features.
Convex PCA improves Euclidean PCA for convex data subsets.
problem Improving PCA for convex data subsets.
method Developed new theoretical results and a numerical implementation for finite dimensional convex PCA.
result Finite dimensional convex PCA approximates Wasserstein GPCA and ranked compositional data.
The paper explores capital allocation using Euler formula with VaR and ES, revealing non-monotonicity and providing estimation methods.
problem Non-monotonicity in VaR-based capital allocation and the need for consistent risk measures.
method Use of Euler formula, Value-at-Risk (VaR), Expected shortfall (ES), simulation, and Markov chain Monte Carlo.
result Capital allocation with VaR is not monotonous, and consistent risk measures are crucial.
Study finds stock prices rarely appreciate during capital inflows but often appreciate during normal flows.
problem Understanding stock price behavior during capital inflows and outflows.
method Identified capital flow episodes using threshold and k-means clustering; detected stock index changepoints using PELT method; combined results over identified capital flows.
result Stock prices rarely appreciate during capital inflows but often appreciate during normal flows.
In this paper we see the evolution of a capitalized financial event e, with respect to a capitalization factor f, as the exponential map of a suitably defined Lie group G(f,e), supported by the half-space of capitalized financial events having the same capital sign of e. The Lie group G(f,e) depends upon the capitaliza…
The paper models financial markets and real economy interactions using a large agent framework.
problem Understanding capital allocation and accumulation in financial markets and real economy interactions.
method Developed a field-formalism model to analyze interactions between financial markets and real economy with a large number of heterogeneous agents.
result The number of firms in each sector depends on the aggregate financial capital invested and expected long-term returns.
Statistical fields model explains capital allocation and accumulation among firms and investors.
problem Understanding capital allocation and accumulation dynamics among firms and investors.
method Applied statistical fields formalism to heterogeneous agents divided into firms and investors.
result Capital accumulation depends on various factors including long-term returns, competition, and stock price volatility.
Paper introduces G-LowTESTR for efficient tensor bandits.
problem Efficient decision-making in multi-dimensional data with non-linear reward functions.
method Generalized low-rank tensor contextual bandits model and G-LowTESTR algorithm.
result G-LowTESTR achieves superior regret bound compared to vectorization and matricization methods.
This study examines how risky investments affect insurance capital valuation.
problem Standard cost-of-capital assumptions do not account for risky investments.
method Analyzed effects of allowing buffer capital investments in risky assets.
result Decomposition of buffer capital contributions varies with riskiness.
OpenAlpha validates decentralized capital strategies using game theory and market aggregation.
problem Decentralized capital management's lack of trust-minimised, adaptive deployment.
method Game-theoretic validation, adversarial auditing, market-based belief aggregation.
result Confidence scores from validation phases inform capital allocation rules.
Atlas-type models are constant-parameter models of uncorrelated stocks for equity markets with a stable capital distribution, in which the growth rates and variances depend on rank. The simplest such model assigns the same, constant variance to all stocks; zero rate of growth to all stocks but the smallest; and positiv…
Credit (CVA), Debit (DVA) and Funding Valuation Adjustments (FVA) are now familiar valuation adjustments made to the value of a portfolio of derivatives to account for credit risks and funding costs. However, recent changes in the regulatory regime and the increases in regulatory capital requirements has led many banks…
The paper analyzes optimal dividend and capital injection strategies under time-inconsistent preferences.
problem Optimal dividend and capital injection strategies under time-inconsistent preferences.
method Diffusion risk model with general discount functions, weak equilibrium definition, HJB equation system.
result Explicit solutions and threshold types of optimal strategies derived under different discount functions.
Study systemic risk measures and capital allocation rules, showing commonalities.
problem Systemic risk measures and capital allocation in financial systems.
method Developed a general framework to embed axiomatic and injective capital approaches, introduced Aumann-Shapley CAR.
result Aumann-Shapley CAR provides a universal method for capital allocation regardless of risk measurement.
Study analyzes household capital risk and poverty trapping, deriving a new function for capital deficit distribution.
problem Analyzing the risk of household capital falling into poverty.
method Introduced a new Gerber-Shiu function to model trapping time and capital deficit distribution.
result Derived a model for capital deficit distribution at trapping using GB distributions.
This paper presents a model of capital accumulation for a large number of heterogenous producer-consumers in an exchange space in which interactions depend on agents' positions. Each agent is described by his production, consumption, stock of capital, as well as the position he occupies in this abstract space. Each age…
New method allocates capital based on tail central moments for financial risk assessment.
problem Inability of CTE-based capital allocation to reflect tail behavior of losses.
method Developed TCM-based capital allocation for normal mean-variance mixture distributions.
result TCM-based method captures tail risk contributions not detected by CTE.
A dynamical model of capital exchange is introduced in which a specified amount of capital is exchanged between two individuals when they meet. The resulting time dependent wealth distributions are determined for a variety of exchange rules. For ``greedy'' exchange, an interaction between a rich and a poor individual r…
Study analyzes factors affecting capital adequacy in Bangladesh's banks.
problem Factors influencing capital adequacy in commercial banks in Bangladesh.
method Fixed Effect, Random Effect, and Pooled Ordinary Least Square (POLS) methods.
result Several independent variables significantly affect capital adequacy, with specific relationships between leverage, liquidity risk, and other factors.
The largest US banks are required by regulatory mandate to estimate the operational risk capital they must hold using an Advanced Measurement Approach (AMA) as defined by the Basel II/III Accords. Most use the Loss Distribution Approach (LDA) which defines the aggregate loss distribution as the convolution of a frequen…
Market sectors play a key role in the efficient flow of capital through the modern Global economy. We analyze existing sectorization heuristics, and observe that the most popular - the GICS (which informs the S&P 500), and the NAICS (published by the U.S. Government) - are not entirely quantitatively driven, but rather…
We consider the risk sharing problem for capital requirements induced by capital adequacy tests and security markets. The agents involved in the sharing procedure may be heterogeneous in that they apply varying capital adequacy tests and have access to different security markets. We discuss conditions under which there…
Unified approach to equity markets with open and hybrid Jacobi models.
problem Stochastic Portfolio Theory problems in equity markets.
method Combining open markets and hybrid Jacobi processes.
result Stability of capital distribution curve and growth optimal strategies.
In a capital adequacy framework, risk measures are used to determine the minimal amount of capital that a financial institution has to raise and invest in a portfolio of pre-specified eligible assets in order to pass a given capital adequacy test. From a capital efficiency perspective, it is important to identify the s…
Derives equations for capital deepening in a competitive economy without assuming a production function.
problem Understanding capital deepening and firm survival in a competitive economy.
method Derives equations of motion from accounting identities, without assuming a production function. Uses four coupled relaxation equations to govern capital productivity, labor share, and new investment productivity.
result A 1% improvement in new-capital productivity nearly doubles the aggregate growth rate within one capital lifetime.
Study examines impact of capital structure on Indian auto companies' profitability.
problem Understanding the impact of capital structure on profitability of Indian auto companies.
method Used fixed and random effect models with 10 years of data from 17 companies.
result Optimal capital structure improves company performance and maintains capital adequacy.
Research shows that information asymmetry affects how quickly companies adjust their capital structure and expected returns.
problem The relationship between capital structure adjustment speed and expected returns is influenced by information asymmetry.
method A hybrid data regression model was used to test the hypotheses based on data from 120 companies in the Tehran Stock Exchange.
result Information asymmetry positively affects the relationship between capital structure adjustment speed and expected returns.
Modeling maximum drawdown records in capital markets using PDMP.
problem Capturing the statistical properties of maximum drawdown records in financial markets.
method Piecewise Deterministic Markov Process (PDMP) for modeling, statistical analysis of mean and variance, simulation study, parameter estimation techniques.
result Derivation of statistical results including mean and variance of maximum drawdown records.
The paper translates economic models into a field formalism to study capital accumulation and its fluctuations.
problem Understanding capital accumulation and its fluctuations in a complex economic system.
method Developed a field formalism to preserve interactions and microeconomic features, applying it to a microeconomic framework of investors and firms.
result Capital accumulation patterns can emerge at the macro-scale and affect neighboring sectors, leading to permanent fluctuations.
Basel III introduces new capital charges for CVA. These charges, and the Basel 2.5 default capital charge can be mitigated by CDS. Therefore, to price in the capital relief that CDS contracts provide, we introduce a CDS pricing model with three legs: premium; default protection; and capital relief. If markets are compl…
Study validates capital structure theories in Indian public sector banks.
problem Understanding the impact of capital structure on financial performance in Indian banks.
method Developed theoretical framework from capital structure theories, tested hypotheses using statistical techniques.
result Established relation between debt component and financial performance variables.