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.
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No assumptions about the correlation structure between different time points or about the dis…
There are some statistical anomalies in the Chinese stock market, i.e., positive return skewness, anti-leverage effect (positive returns induce higher volatility than negative returns); and reverse volatility asymmetry (contemporaneous return-volatility correlation is positive). In this paper, we first confirm the exis…
Energy markets are strategic to governments and economic development. Several commodities compete as substitutable energy sources and energy diversifiers. Such competition reduces the energy vulnerability of countries as well as portfolios' risk exposure. Vulnerability results mainly from price trends and fluctuations,…
In the present paper, the primal-dual problem consisting of the investment risk minimization problem and the expected return maximization problem in the mean-variance model is discussed using replica analysis. As a natural extension of the investment risk minimization problem under only a budget constraint that we anal…
The signal-noise ratio of a portfolio of p assets, its expected return divided by its risk, is couched as an estimation problem on the sphere. When the portfolio is built using noisy data, the expected value of the signal-noise ratio is bounded from above via a Cramer-Rao bound, for the case of Gaussian returns. The bo…
Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if investments are concentrated in only one country, or more specifically one currenc…
In the world of modern financial theory, portfolio construction has traditionally operated under at least one of two central assumptions: the constraints are derived from a utility function and/or the multivariate probability distribution of the underlying asset returns is fully known. In practice, both the performance…
We study a model of a corporation which has the possibility to choose various production/business policies with different expected profits and risks. In the model there are restrictions on the dividend distribution rates as well as restrictions on the risk the company can undertake. The objective is to maximize the exp…
We provide an economic interpretation of the practice consisting in incorporating risk measures as constraints in a classic expected return maximization problem. For what we call the infimum of expectations class of risk measures, we show that if the decision maker (DM) maximizes the expectation of a random return unde…
Performance analysis, from the external point of view of a client who would only have access to returns and holdings of a fund, evolved towards exact attribution made in the context of portfolio optimisation, which is the internal point of view of a manager controlling all the parameters of this optimisation. Attributi…
The estimation of asset return distributions is crucial for determining optimal trading strategies. In this paper we describe the constrained mixture model, based on a mixture of Gamma and Gaussian distributions, to provide an accurate description of price trends as being clearly positive, negative or ranging while acc…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading volume amounts when the dynamics of the risky asset returns are governed by a discrete-time approximation of the Markov-modulated geometric Brownian motion. The states of Markov chain are interpreted as the states of an …
A novel optimisation framework through quadratic nonlinear projection is introduced for credit portfolio when the portfolio risk is measured by Conditional Value-at-Risk (CVaR). The whole optimisation procedure to search toward the optimal portfolio state is conducted by a series of single-step optimisations under the …
This paper considers nonlinear regular-singular stochastic optimal control of large insurance company. The company controls the reinsurance rate and dividend payout process to maximize the expected present value of the dividend pay-outs until the time of bankruptcy. However, if the optimal dividend barrier is too low t…
This paper uses entropy to derive stock price dynamics and option valuation.
problem Deriving stock price dynamics and option valuation from information constraints.
method Develops an entropic inference framework to derive stochastic processes from information constraints, representing price changes through two channels: continuous and jump.
result The derived dynamics is the Merton jump diffusion, with Geometric Brownian Motion as the no jump limit.
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market prices is modeled on a macro-level as the result of the dynamic coupling of two dyn…