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.
Optimal investment strategy for a large, identical investor or pension fund.
Study on price formation among investors with exponential utility and liabilities.
Approximations to utility indifference prices are provided for a contingent claim in the large position size limit. Results are valid for general utility functions on the real line and semi-martingale models. It is shown that as the position size approaches infinity, the utility function's decay rate for large negative…
Solves utility maximization for delayed informed investors.
Model resolves asset pricing puzzles with price-impact.
We consider a stochastic model of investment on an asset of a stock market for a prudent investor. She decides to buy permanent goods with a fraction $\a$ of the maximum amount of money owned in her life in order that her economic level never decreases. The optimal strategy is obtained by maximizing the exponential gro…
We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors' income rates as well as the stock's dividend rate are governed by discontinuous Levy processes. Our main result provides the equilibrium (i.e., bond and stock price dynamics) in closed-form. As an a…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric Brownian motion and exponential Ornstein-Uhlenbeck models -- to account for, respectiv…
The paper models asset pricing in a partially observed market using mean field game theory and exponential quadratic Gaussian framework.
In the setting of exponential investors and uncertainty governed by Brownian motions we first prove the existence of an incomplete equilibrium for a general class of models. We then introduce a tractable class of exponential-quadratic models and prove that the corresponding incomplete equilibrium is characterized by a …
Existence of incomplete Radner equilibrium with endogenous noise tracker.
Investor maximizes utility from an unknown claim using robust optimization.
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the market maker quotes the prices such that by taking the other side of the invest…
Investors in stock market are usually greedy during bull markets and scared during bear markets. The greed or fear spreads across investors quickly. This is known as the herding effect, and often leads to a fast movement of stock prices. During such market regimes, stock prices change at a super-exponential rate and ar…
Investor optimizes utility in a market with endogenous pricing.
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and maximize their constant relative risk aversion expected utility with respect to thei…
The paper solves a utility-based hedging problem with quadratic costs.
Investors choose between bonds and savings accounts based on utility maximization.
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward jump in an asset's price results in increased likelihood of further jumps, both …
We study the cross-correlation matrix of inventory variations of the most active individual and institutional investors in an emerging market to understand the dynamics of inventory variations. We find that the distribution of cross-correlation coefficient has a power-law form in the bulk followed by …
We study multistep Bayesian betting strategies in coin-tossing games in the framework of game-theoretic probability of Shafer and Vovk (2001). We show that by a countable mixture of these strategies, a gambler or an investor can exploit arbitrary patterns of deviations of nature's moves from independent Bernoulli trial…
Investor optimizes stock investments with noisy future price signals.
Investor optimizes investment timing with future knowledge, overcoming transaction costs.
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of heterogeneous exponential utility investors, who receive partially unspanned income …
New model explains volatility after extreme stock market events.
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by dynamically investing in a financial market, and statically in available options. We show …
Study on MMV in jump-diffusion models resolves MV's non-monotonicity issues.
We study an optimal consumption and investment problem in a possibly incomplete market with general, not necessarily convex, stochastic constraints. We give explicit solutions for investors with exponential, logarithmic and power utility. Our approach is based on martingale methods which rely on recent results on the e…
This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross (CIR), or exponential Ornstein-Uhlenbeck (XOU) model. The futures term structure is derived and its conne…
Study utility maximization with delayed information in continuous time Gaussian markets.
Study portfolio optimization with an exponential utility function and illiquid asset.
Closed-form optimal portfolios for exponential utility in small/large markets.
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by closed, but not necessarily convex, sets. The final wealths obtained by trading under…
This paper studies the timing of trades under mean-reverting price dynamics subject to fixed transaction costs. We solve an optimal double stopping problem to determine the optimal times to enter and subsequently exit the market, when prices are driven by an exponential Ornstein-Uhlenbeck process. In addition, we analy…
We consider a market impact game for risk-averse agents that are competing in a market model with linear transient price impact and additional transaction costs. For both finite and infinite time horizons, the agents aim to minimize a mean-variance functional of their costs or to maximize the expected exponential u…
The paper finds optimal strategies for hedging in incomplete markets using derivatives.
In this paper we derive the exact solution of the multi-period portfolio choice problem for an exponential utility function under return predictability. It is assumed that the asset returns depend on predictable variables and that the joint random process of the asset returns and the predictable variables follow a vect…
We present a new microscopic stochastic model for an ensemble of interacting investors that buy and sell stocks in discrete time steps via limit orders based on individual forecasts about the price of the stock. These orders determine the supply and demand fixing after each round (time step) the new price of the stock …
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for both the buyer's and seller's indifference price. For European calls on a trade…
Study optimal liquidation under high risk aversion and small price impact.
Trading algorithms that execute large orders are susceptible to exploitation by order anticipation strategies. This paper studies the influence of order anticipation strategies in a multi-investor model of optimal execution under transient price impact. Existence and uniqueness of a Nash equilibrium is established unde…
We build a multiassets heterogeneous agents model with fundamentalists and chartists, who make investment decisions by maximizing the constant relative risk aversion utility function. We verify that the model can reproduce the main stylized facts in real markets, such as fat-tailed return distribution and long-term mem…
Study on stock portfolio concentration among Finnish households and investors.
Investor skill levels affect optimal portfolio size, study shows.
This paper extends the classical consumption and portfolio rules model in continuous time (Merton 1969, 1971) to the framework of decision-makers with time-inconsistent preferences. The model is solved for different utility functions for both, naive and sophisticated agents, and the results are compared. In order to so…
Young investors, especially students, dominate Indonesian stock exchanges.
We analyze the linear response of a market network to shocks based on the bipartite market model we introduced in an earlier paper, which we claimed to be able to identify the time-line of the 2009-2011 Eurozone crisis correctly. We show that this model has three distinct phases that can broadly be categorized as "stab…
Modeling investor behavior from financial advisor notes using NLP.