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 research uses empirical copulas to price quanto options, showing significant differences from traditional models.
Study shows variance gamma model outperforms Black-Scholes for USD-INR currency options.
Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the mark…
Abstract framework for cross-currency interest rate contracts.
The study examines tail dependence between global economic uncertainty and BRICS currencies using high-frequency data.
For the purpose of elucidating the correlation among currencies, we analyze daily and high-resolution data of foreign exchange rates. There is strong correlation for pairs of currencies of geographically near countries. We show that there is a time delay of order less than a minute between two currency markets having a…
World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign exchange rates within the basket of 60 currencies in the period December 1998 -- M…
There is intense interest in understanding the stochastic and dynamical properties of the global Foreign Exchange (FX) market, whose daily transactions exceed one trillion US dollars. This is a formidable task since the FX market is characterized by a web of fluctuating exchange rates, with subtle inter-dependencies wh…
The currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial puzzle to explain, since assuming foreign exchange risk is uninhibited and the …
In a system containing a large number of interacting stochastic processes, there will typically be many non-zero correlation coefficients. This makes it difficult to either visualize the system's inter-dependencies, or identify its dominant elements. Such a situation arises in Foreign Exchange (FX) which is the world's…
Develops optimal trading strategy for illiquid currency pairs.
Model predicts majority of countries will prefer BRI over USD by 2020.
A new framework for pricing the European currency option is developed in the case where the spot exchange rate fellows a time-changed fractional Brownian motion. An analytic formula for pricing European foreign currency option is proposed by a mean self-financing delta-hedging argument in a discrete time setting. The m…
Intuitively, the default risk of a single borrower is higher when her or his assets and debt are denominated in different currencies. Additionally, the default dependence of borrowers with assets and debt in different currencies should be stronger than in the one-currency case. By combining well-known models by Merton …
On Jan. 1, 1999 the European Union introduced a common currency Euro (), to become the legal currency in all eleven countries which form the . In order to test the behavior and understand various features, the exchange rate is artificially extrapolated back to 1993 by a linear superposition of the…
We investigate topology and temporal evolution of the foreign currency exchange market viewed from a weighted network perspective. Based on exchange rates for a set of 46 currencies (including precious metals), we construct different representations of the FX network depending on a choice of the base currency. Our resu…
Collateralization with daily margining has become a new standard in the post-crisis market. Although there appeared vast literature on a so-called multi-curve framework, a complete picture of a multi-currency setup with cross-currency basis can be rarely found since our initial attempts. This work gives its extension r…
Option written on several foreign exchange rates (FXRs) depends on correlation between the rates. To evaluate the option, historical estimates for correlations can be used but usually they are not stable. More significantly, pricing of the option using these estimates is usually inconsistent to the traded vanilla contr…
Support Vector Machine (SVM) is powerful classification technique based on the idea of structural risk minimization. Use of kernel function enables curse of dimensionality to be addressed. However, proper kernel function for certain problem is dependent on specific dataset and as such there is no good method on choice …
In this paper, we present a two-stage stochastic international portfolio optimisation model to find an optimal allocation for the combination of both assets and currency hedging positions. Our optimisation model allows a "currency overlay", or a deviation of currency exposure from asset exposure, to provide flexibility…
Financial markets are complex adaptive systems, and are commonly studied as complex networks. Most of such studies fall short in two respects: they do not account for non-linearity of the studied relationships, and they create one network for the whole studied time series, providing an average picture of a very long, e…
The Euro (EUR) has been a currency introduced by the European Community on Jan. 01, 1999. This implies eleven countries of the European Union which have been found to meet the five requirements of the Maastricht convergence criteria. In order to test EUR behavior and understand various features, we have extrapolated th…
Proposes a new method to assess Wrong-Way Risk in cross-currency swaps.
We present a simplistic model of the competition between different currencies. Each individual is free to choose the currency that minimizes his transaction costs, which arise whenever his exchanging relations have chosen a different currency. We show that competition between currencies does not necessarily converge to…
By analyzing the foreign exchange market data of various currencies, we derive a hierarchical taxonomy of currencies constructing minimal-spanning trees. Clustered structure of the currencies and the key currency in each cluster are found. The clusters match nicely with the geographical regions of corresponding countri…
Using one of the key property of copulas that they remain invariant under an arbitrary monotonous change of variable, we investigate the null hypothesis that the dependence between financial assets can be modeled by the Gaussian copula. We find that most pairs of currencies and pairs of major stocks are compatible with…
New method models asymmetric data with improved tail dependence.
Paper examines pricing and hedging for cross-currency swaps referencing backward-looking rates.
Bitcoins have emerged as a possible competitor to usual currencies, but other crypto-currencies have likewise appeared as competitors to the Bitcoin currency. The expanding market of crypto-currencies now involves capital equivalent to US Dollars, providing academia with an unusual opportunity to study the em…
Brazil proposes a new BRICS trade currency to dominate international trade.
Develops a new model for cross-currency derivatives pricing.
A large set of daily FOREX time series is analyzed. The corresponding correlation matrices (CM) are constructed for USD, EUR and PLZ used as the base currencies. The triangle rule is interpreted as constraints reducing the number of independent returns. The CM spectrum is computed and compared with the cases of shuffle…
Credit Default Swaps (CDS) on a reference entity may be traded in multiple currencies, in that protection upon default may be offered either in the domestic currency where the entity resides, or in a more liquid and global foreign currency. In this situation currency fluctuations clearly introduce a source of risk on C…
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group together all the exchange rates with a common base currency and study each group separa…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate tenors. Within such double-curve-single-currency framework, adopted by the market…
Digital currencies exhibit multifractality due to heavy-tailed returns and temporal correlations.
New digital currency aims for equal wealth distribution.
Hybrid method reveals true currency correlations.
Study on collateral currency impact in differential swaps valuation.
It is well known that traded foreign exchange forwards and cross currency swaps (CCS) cannot be priced applying overnight cash and carry arguments as they imply absence of funding advantage of one currency to the other. This paper proposes a heuristic present value concept for multi-currency pricing and hedging which a…
Enhances currency strategy Sharpe ratio by 30% using context-aware Learning to Rank.
The study reveals the hierarchical structure of the international FOREX market using currency fluctuation distribution similarities.
In this paper an econophysics model for the currency exchange operations with commission is proposed. With this purpose some analogies and similarities of the processes that take place in the frame of the electrochemical system made from electrodes sunk into a solution of electrolytes and the process of the currency ex…
We study the dynamics of the linear and non-linear serial dependencies in financial time series in a rolling window framework. In particular, we focus on the detection of episodes of statistically significant two- and three-point correlations in the returns of several leading currency exchange rates that could offer so…
Gold and currency markets form a unique pair with specific interactions and dynamics. We focus on the efficiency ranking of gold markets with respect to the currency of purchase. By utilizing the Efficiency Index (EI) based on fractal dimension, approximate entropy and long-term memory on a wide portfolio of 142 gold p…
We examine the problem of dynamic reserving for risk in multiple currencies under a general coherent risk measure. The reserver requires to hedge risk in a time-consistent manner by trading in baskets of currencies. We show that reserving portfolios in multiple currencies are time-consistent when (and only…
We develop the first basic Operational Risk perspective on key risk management issues associated with the development of new forms of electronic currency in the real economy. In particular, we focus on understanding the development of new risks types and the evolution of current risk types as new components of financia…
Digital currencies and cryptocurrencies have hesitantly started to penetrate the investors, and the next step will be the regulatory risk management framework. We examine the Value-at-Risk and Expected Shortfall properties for the major digital currencies, Bitcoin, Ethereum, Litecoin, and Ripple. The methodology used i…