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.
The paper models and prices cyber insurance risks, distinguishing idiosyncratic, systematic, and systemic risks.
This paper focuses on the horse race of weekly idiosyncratic momentum (IMOM) with respect to various idiosyncratic risk metrics. Using the A-share individual stocks in the Chinese market from January 1997 to December 2017, we first evaluate the performance of the weekly momentum based on raw returns and idiosyncratic r…
Study uses TV news to measure climate risks affecting clean energy firms.
Study finds significant premium for low-beta stocks in firm-level idiosyncratic return distributions.
Study analyzes crypto asset risk exposures using a divide-and-conquer approach.
New portfolio optimization method considers both asset-specific and systemic risks for financial networks.
Study shows different types of volatility and skewness changes affect stock prices.
Regulations impose idiosyncratic capital and funding costs for holding derivatives. Capital requirements are costly because derivatives desks are risky businesses; funding is costly in part because regulations increase the minimum funding tenor. Idiosyncratic costs mean no single measure makes derivatives martingales f…
Network models assume unrealistic idiosyncratic risk, which can be mitigated by allowing for correlated shocks.
Extends ASRF model for green and brown loans, accounting for systematic and idiosyncratic risks.
A risk of small defined-benefit pension schemes is that there are too few members to eliminate idiosyncratic mortality risk, that is there are too few members to effectively pool mortality risk. This means that when there are few members in the scheme, there is an increased risk of the liability value deviating signifi…
Currency volatility shocks predict lower excess returns, and buying weak transmitters outperforms selling strong ones.
This study proposes an equal-weight portfolio strategy to reduce risk compared to traditional ETFs.
Method for factor analysis in short panels without assuming sphericity or Gaussianity.
Study tests if equity factors explain Bitcoin's risk and returns.
The paper proposes a new risk model for foundation models in finance.
Study shows cryptocurrency investor base affects volatility.
We propose a model and an estimation technique to distinguish systemic risk and contagion in credit risk. The main idea is to assume, for a set of obligors, a set of idiosyncratic shocks and a shock that triggers the default of all them. All shocks are assumed to be linked by a dependence relationship, that in …
The study finds a liquidity premium in stock returns, but only after correcting for microstructure noise.
We develop a dynamic point process model of correlated default timing in a portfolio of firms, and analyze typical default profiles in the limit as the size of the pool grows. In our model, a firm defaults at a stochastic intensity that is influenced by an idiosyncratic risk process, a systematic risk process common to…
We propose a new methodology based on the Marshall-Olkin (MO) copula to model cross-border systemic risk. The proposed framework estimates the impact of the systematic and idiosyncratic components on systemic risk. Initially, we propose a maximum-likelihood method to estimate the parameter of the MO copula. In order to…
Haircutting non-cash collateral has become a key element of the post-crisis reform of the shadow banking system and OTC derivatives markets. This article develops a parametric haircut model by expanding haircut definitions beyond the traditional value-at-risk measure and employing a double-exponential jump-diffusion mo…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic variations in the individual assets described by the formula. The paper makes simpl…
This paper proposes a hybrid credit risk model, in closed form, to price vulnerable options with stochastic volatility. The distinctive features of the model are threefold. First, both the underlying and the option issuer's assets follow the Heston-Nandi GARCH model with their conditional variance being readily estimat…
Model predicts default risk based on company's financial forecasts and credit conditions.
This paper improves credit risk analysis by incorporating state-dependent recovery rates into a factor model.
Aggregate and systemic risk in complex systems are emergent phenomena depending on two properties: the idiosyncratic risks of the elements and the topology of the network of interactions among them. While a significant attention has been given to aggregate risk assessment and risk propagation once the above two propert…
We find that when measured in terms of dollar-turnover, and once -neutralised and Low-Vol neutralised, the Size Effect is alive and well. With a long term t-stat of , the "Cold-Minus-Hot" (CMH) anomaly is certainly not less significant than other well-known factors such as Value or Quality. As compared to marke…
Compact formulas for evaluating insurance policies' risks.
Comonotonic allocations are restored under certain constraints, improving risk-sharing.
Study compares CDS databases and finds discrepancies due to various factors.
Automated investment managers, or robo-advisors, have emerged as an alternative to traditional financial advisors. The viability of robo-advisors crucially depends on their ability to offer personalized financial advice. We introduce a novel framework, in which a robo-advisor interacts with a client to solve an adaptiv…
We develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It makes specific predictions about the volume of gains and losses, the holding periods…
The isotropic correlation model explains equity returns better than linear factor models.
The global financial system has become highly connected and complex. Has been proven in practice that existing models, measures and reports of financial risk fail to capture some important systemic dimensions. Only lately, advisory boards have been established in high level and regulations are directly targeted to syst…
A parametric point process model is developed, with modeling based on the assumption that sequential observations often share latent phenomena, while also possessing idiosyncratic effects. An alternating optimization method is proposed to learn a "registered" point process that accounts for shared structure, as well as…
New method for estimating financial covariance matrices efficiently.
Analyzes how many people can receive stable income in a pooled annuity fund.
In the top-down approach to multi-name credit modeling, calculation of singe name sensitivities appears possible, at least in principle, within the so-called random thinning (RT) procedure which dissects the portfolio risk into individual contributions. We make an attempt to construct a practical RT framework that enab…
The paper models systemic risk in European and U.S. banks using factor copulas.
Estimates mean and covariance for large, unbalanced stock returns panels.
We formulate a stochastic game of mean field type where the agents solve optimal stopping problems and interact through the proportion of players that have already stopped. Working with a continuum of agents, typical equilibria become functions of the common noise that all agents are exposed to, whereas idiosyncratic r…
This paper investigates the risk-return relationship in determination of housing asset pricing. In so doing, the paper evaluates behavioral hypotheses advanced by Case and Shiller (1988, 2002, 2009) in studies of boom and post-boom housing markets. The paper specifies and tests a multi-factor housing asset pricing mode…
Study Nash competition among dealers quoting prices to clients with unknown trading motives.
Enhances risk model with new statistical factors.
Study replicates reference-dependent preferences impact on risk-return trade-off in Chinese stock market.
We performed a comprehensive analysis on the price bounds of CDO tranche options, and illustrated that the CDO tranche option prices can be effectively bounded by the joint distribution of default time (JDDT) from a default time copula. Systemic and idiosyncratic factors beyond the JDDT only contribute a limited amount…
Economic factors significantly influence stock returns, as shown by attribution analysis.