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.
Study reveals how illiquidity network signals Chinese stock market crashes.
Framework improves risk neutral density estimation in illiquid markets.
This paper provides a framework for modeling the financial system with multiple illiquid assets when liquidation of illiquid assets is caused by failure to meet a leverage requirement. This extends the network model of Cifuentes, Shin & Ferrucci (2005) which incorporates a single asset with fire sales and capital adequ…
Develops a nonparametric model for arbitrage-free pricing of illiquid derivatives.
Optimizes asset allocation with illiquid assets using MPC.
The article models illiquid stocks using quantum calculus with asymptotic methods.
Paper examines trade/no trade patterns in illiquid stocks, highlighting effects of varying zero returns probabilities.
Study models illiquid stock prices and finds low correlation due to constant prices.
Model simulates sparse order books in illiquid markets.
We study a problem of optimal investment/consumption over an infinite horizon in a market consisting of a liquid and an illiquid asset. The liquid asset is observed and can be traded continuously, while the illiquid one can only be traded and observed at discrete random times corresponding to the jumps of a Poisson pro…
New concept of illiquidity linked to credit risk, using Jarrow & Turnbull's analogy.
This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic while the Y-hedge is static. Using the indifference pricing approach we derive a HJ…
We study a problem of optimal investment/consumption over an infinite horizon in a market consisting of two possibly correlated assets: one liquid and one illiquid. The liquid asset is observed and can be traded continuously, while the illiquid one can be traded only at discrete random times corresponding to the jumps …
Management of the portfolios containing low liquidity assets is a tedious problem. The buyer proposes the price that can differ greatly from the paper value estimated by the seller, the seller, on the other hand, can not liquidate his portfolio instantly and waits for a more favorable offer. To minimize losses in this …
The scope of financial systemic risk research encompasses a wide range of interbank channels and effects, including asset correlation shocks, default contagion, illiquidity contagion, and asset fire sales. This paper introduces a financial network model that combines the default and liquidity stress mechanisms into a "…
Several models for the pricing of derivative securities in illiquid markets are discussed. A typical type of nonlinear partial differential equations arising from these investigation is studied. The scaling properties of these equations are discussed. Explicit solutions for one of the models are obtained and studied.
Develops optimal trading strategy for illiquid currency pairs.
A new relaxed framework for pricing illiquid derivatives using bid-ask spreads.
We study the problem of optimal pricing and hedging of a European option written on an illiquid asset using a set of proxies: a liquid asset , and liquid European options , each written on a liquid asset . We assume that the -hedge is dynamic while the multi-name -hedge is static. Usin…
The paper models Gasoil options using Brent benchmarks, improving volatility estimation.
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets. Since most markets are illquid, this assumption might be too restrictive. Thus, taki…
Improved ARMA-GARCH model for illiquid assets like cryptocurrencies.
Investment strategy optimized in markets with transaction costs and search delays.
Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The Goal of this article is to find optimal hedging strategy of European call/put opti…
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation in the fixed income market: it is rather usual to find issuers that, besides liq…
QCML improves bond similarity learning in illiquid markets.
CDS (credit default swap) contracts that were initiated some time ago frequently have spreads and/or maturities that are not available on the current market of CDSs, and are thus illiquid. This article introduces an incomplete-market approach to valuing illiquid CDSs that, in contrast to the risk-neutral approach of cu…
Taylor's law of temporal fluctuation scaling, variance mean, is ubiquitous in natural and social sciences. We report for the first time convincing evidence of a solid temporal fluctuation scaling law in stock illiquidity by investigating the mean-variance relationship of the high-frequency illiquidity o…
We consider an optimal consumption/investment problem to maximize expected utility from consumption. In this market model, the investor is allowed to choose a portfolio which consists of one bond, one liquid risky asset (no transaction costs) and one illiquid risky asset (proportional transaction costs). We fully chara…
We study super--replication of European contingent claims in an illiquid market with insider information. Illiquidity is captured by quadratic transaction costs and insider information is modeled by an investor who can peek into the future. Our main result describes the scaling limit of the super--replication prices wh…
New framework replicates private equity performance using AI and liquid strategies.
Introduces a new Lévy process for modeling illiquid markets.
Improved pricing method for illiquid assets using Lambert function.
Paper develops models to forecast private equity fund cash flows.
Management of a portfolio that includes an illiquid asset is an important problem of modern mathematical finance. One of the ways to model illiquidity among others is to build an optimization problem and assume that one of the assets in a portfolio can not be sold until a certain finite, infinite or random moment of ti…
Study simulates liquidity in fractional ownership markets using ABM.
We consider expected utility maximisation problem for exponential Levy models and HARA utilities in presence of illiquid asset in portfolio. This illiquid asset is modelled by an option of European type on another risky asset which is correlated with the first one. Under some hypothesis on Levy processes, we give the e…
The paper addresses XVA valuation under market crises using a renewal process.
Quantum calculus models stock liquidity issues.
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…
In this paper we introduce a generalized extension of the Eisenberg-Noe model of financial contagion to allow for time dynamics of the interbank liabilities, including a dynamic examination of default risk. This framework separates the cash account and long-term capital account to more accurately model the health of a …
Extends micro-price concept to RFQ markets for fair pricing.
Study optimal semi-static hedging for illiquid markets using dynamic cash and static quoted derivatives.
We study super-replication of contingent claims in an illiquid market with model uncertainty. Illiquidity is captured by nonlinear transaction costs in discrete time and model uncertainty arises as our only assumption on stock price returns is that they are in a range specified by fixed volatility bounds. We provide a …
This paper solves hedging in incomplete markets using neural networks.
Optimizes financial decisions with illiquid assets using Kelly criterion.
Mid-price movement prediction based on limit order book (LOB) data is a challenging task due to the complexity and dynamics of the LOB. So far, there have been very limited attempts for extracting relevant features based on LOB data. In this paper, we address this problem by designing a new set of handcrafted features …
This paper uses RL to optimize bid-ask spreads for illiquid corporate bonds.