We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance between trading times. We derive a non trivial hedging error for a class of European options with convex payoff in the…
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48 results for “transaction errors”
Dynamic hedging of an European option under a general local volatility model with small linear transaction costs is studied. A continuous control version of Leland's strategy that asymptotically replicates the payoff is constructed. An associated central limit theorem of hedging error is proved. The asymptotic error va…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative volatility enable us to super-hedge convex and concave payoffs respectively. The ide…
Corporate bond factor research is flawed due to measurement errors and ex-post filtering.
problem Replication crisis in corporate bond factor research.
method Analysis of 108 signals across nine thematic clusters, correction of transaction prices and return filtering.
result Majority of previously documented factors do not produce statistically significant alphas after correction.
Using elementary arguments, we show how to derive -error bounds for the approximation of frictionless wealth process in markets with proportional transaction costs. For utilities with bounded risk aversion, these estimates yield lower bounds for the frictional value function, which pave the way for its as…
New RL method improves financial index tracking accuracy.
problem Optimizing financial index tracking with dynamic market information.
method Discrete-time dynamic model, Banach fixed point iteration, deep reinforcement learning.
result Proposed RL method outperforms benchmarks in tracking accuracy.
This paper studies the problem of option replication in general stochastic volatility markets with transaction costs, using a new specification for the volatility adjustment in Leland's algorithm \cite{Leland}. We prove several limit theorems for the normalized replication error of Leland's strategy, as well as that of…
Proposes a robust and sparse portfolio selection model to reduce estimation errors and transaction costs.
problem Reduces impact of estimation errors and fixed transaction costs in portfolio selection.
method Develops an efficient algorithm to solve a mixed integer problem with an ellipsoidal uncertainty set.
result Proves the convergence of the algorithm to at least a local minimizer with a locally linear convergence rate.
Asymptotic error distribution for approximation of a stochastic integral with respect to continuous semimartingale by Riemann sum with general stochastic partition is studied. Effective discretization schemes of which asymptotic conditional mean-squared error attains a lower bound are constructed. Two applications are …
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves seemingly new. Asymptotically efficient schemes which attain the lower bounds a…
Algorithm for hedging American options with transaction costs.
problem Hedging American options considering transaction costs.
method Backward Hedging algorithm minimizing loss function.
result Optimal hedging strategy determined by minimizing loss function.
Approximate hedging with proportional transaction costs in stochastic volatility models with jumpsq-fin.MF
We study the problem of option replication under constant proportional transaction costs in models where stochastic volatility and jumps are combined to capture the market's important features. Assuming some mild condition on the jump size distribution we show that transaction costs can be approximately compensated by …
We examine the novel problem of the estimation of transaction arrival processes in the intraday electricity markets. We model the inter-arrivals using multiple time-varying parametric densities based on the generalized F distribution estimated by maximum likelihood. We analyse both the in-sample characteristics and the…
Study portfolio selection with exogenous and endogenous transaction costs using deep learning.
problem Portfolio selection with both exogenous and endogenous transaction costs.
method Deep learning-driven policy iteration scheme for high-dimensional HJB equations.
result Proposes a scheme to address the curse of dimensionality and adapt to high-dimensional control spaces.
Deep neural network solves portfolio optimization with MGARCH and small transaction costs.
problem Optimizing portfolios with MGARCH and small transaction costs.
method Fixed-point RL algorithm using neural networks.
result NN algorithm shows positive testing performance.
Study evaluates discretized arbitrage strategies in fractional financial markets.
problem Serial correlation in financial markets with fractional Brownian motion.
method Revisit and transfer Shiryaev and Salopek's strategies to a real-world setting, distretizing dynamics and introducing transaction costs.
result Both strategies are promising with respect to terminal portfolio values and loss probabilities.
Ethereum Fraud Detection via Joint Transaction Language Model and Graph Representation Learningcs.CR
TLMG4Eth combines language and graph models for Ethereum fraud detection.
problem Current fraud detection methods fail to consider semantic and similarity patterns in Ethereum transactions.
method TLMG4Eth uses a transaction language model and graph-based methods to capture semantic, similarity, and structural features.
result TLMG4Eth detects anomalies in Ethereum transactions more effectively than existing methods.
This research develops heuristics to detect CoinJoin transactions on Bitcoin blockchain.
problem Compromised privacy in Bitcoin transactions due to CoinJoin.
method Analyzed open-source CoinJoin implementations to develop heuristics.
result Refined heuristics for identifying CoinJoin transactions on the blockchain.
Robustifying Markowitzecon.EM
Robustifies Markowitz portfolios to reduce transaction costs and improve performance.
problem Markowitz portfolios are unreliable due to estimation errors and extreme weights.
method Projected gradient descent and robust statistics for stable weights and costs.
result Robustified Markowitz portfolios have lower turnover and maintain or improve performance.
Investment strategy optimized in markets with transaction costs and search delays.
problem Maximizing wealth in an illiquid market with transaction costs and search frictions.
method Characterized no-trade region and provided asymptotic expansions of value function for small transaction costs.
result The effects of transaction costs are more pronounced in illiquid markets.
Revisits superhedging under proportional costs in continuous time markets.
problem Superhedging in markets with proportional transaction costs.
method Set-valued stochastic analysis, continuous trading schemes, dynamic risk measure.
result Dynamic set-valued risk measure with multi-portfolio time-consistency.
Transaction costs appear in financial markets in more than one form. There are several results in the literature on small proportional transaction cost and not that many on fixed transaction cost. In the present work, we heuristically study the effect of both types of transaction cost by focusing on a portfolio optimiz…
The study examines pricing American options with both exogenous and endogenous transaction costs.
problem Pricing American options with transaction costs and liquidity risks.
method Modeling liquidity risks as a mean-reverting process and transaction costs as proportional to trading amount. Two nonlinear PDEs are used to characterize option values. Numerical solution via ADI method and model calibration using maximum likelihood estimation.
result The model incorporating liquidity risks significantly outperforms the Leland model.
Study reveals dynamic causal relationships between Ethereum transaction fees and economic subsystems.
problem Historical gas fee volatility caused economic disequilibria and stakeholder challenges.
method Time-varying Granger causality analysis using data on active wallets and transaction volume.
result Dynamic bidirectional causal relationships between transaction fees and economic subsystems across Ethereum.
Bridging Stochastic Control and Deep Hedging: Structural Priors for No-Transaction Band Networksq-fin.PR
The paper bridges stochastic control and deep hedging for European call options with transaction costs.
problem Hedging and pricing European call options with proportional transaction costs.
method Complementary perspectives: stochastic control and deep hedging. Two architectures proposed: NTBN-Delta and WW-NTBN.
result WW-NTBN converges faster, matches no-transaction bands more closely, and generalizes well across transaction cost regimes.
New method improves blockchain analysis by handling temporal changes and scalability.
problem Limited focus on evolving nature and scalability of blockchain transaction networks.
method Incremental approach with Metropolis-Hastings random walks.
result Comparable performance in node classification tasks with reduced computational overhead.
In this short note, we consider mean-variance optimized portfolios with transaction costs. We show that introducing quadratic transaction costs makes the optimization problem more difficult than using linear transaction costs. The reason lies in the specification of the budget constraint, which is no longer linear. We …
This survey analyzes knowledge discovery in cryptocurrency transactions.
problem Understanding user behaviors and collective actions in cryptocurrency transactions.
method Data mining techniques and literature review.
result Classified existing research into three aspects and discussed major findings.
Deep models for financial transactions are vulnerable to adversarial attacks, especially when adding transaction tokens.
problem Vulnerability of deep models to adversarial attacks on financial transaction records.
method Examine adversarial attacks and defenses on transaction records data, considering black-box attacks and adding transaction tokens.
result A few generated transactions can fool a deep-learning model, highlighting the need for robustness improvements.
Improved option pricing model with transaction costs.
problem Inaccurate option pricing without considering transaction costs.
method Developed a replicating strategy with exponentially decreasing transaction costs.
result Validated the effectiveness of the new model through simulations.
The paper optimizes portfolios with transaction costs in a large asset universe.
problem Optimizing portfolios with transaction costs in a large asset universe.
method Mean-variance optimization with nonconvex penalty for proportional and quadratic transaction costs.
result The proposed models show satisfactory performance and highlight the importance of transaction costs.
Study how transaction costs impact stock returns and holdings in equilibrium.
problem Impact of quadratic transaction costs on equilibrium stock returns and holdings.
method Developed a continuous-time risk-sharing model with FBSDEs to characterize equilibrium stock holdings and trading rates.
result Equilibrium stock holdings and trading rates are uniquely determined by FBSDEs, and equilibrium return by a system of coupled FBSDEs.
We prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to two distinct changes in their optimal investment approach: price impact causes a…
Bank transactions help predict macroeconomic indexes faster and more accurately.
problem Lag in macroeconomic index availability and autoregressive models' limitations in complex scenarios.
method Use financial transactions data to estimate macroeconomic indexes using neural networks and smart sampling.
result Neural network approach outperforms baseline methods on hand-crafted features based on transactions.
Ethereum block builders can earn up to $14M/month by reordering transactions, harming users.
problem Block builders can exploit transaction reordering to earn significant profits, harming users.
method Estimation of MEV payments and analysis of reordering effects.
result Block builders can earn up to $14M/month by reordering transactions, skewing the distribution.
Generative model predicts NFT collection transactions based on early history.
problem Predict future transactions of newly minted NFT collections.
method Unsupervised learning to extract contexts, then generate future transactions.
result Projected market value of new NFT collections.
We examine the relationship between trading volumes, number of transactions, and volatility using daily stock data of the Tokyo Stock Exchange. Following the mixture of distributions hypothesis, we use trading volumes and the number of transactions as proxy for the rate of information arrivals affecting stock volatilit…
Unified Asymptotics For Investment Under Illiquidity: Transaction Costs And Search Frictionsq-fin.MF
Unified asymptotics for investment in markets with transaction costs and search frictions.
problem Investment in markets with transaction costs and search frictions.
method Power-utility maximization problem with proportional transaction costs and Poisson-triggered trades, analyzed using a novel asymptotic framework.
result Explicit asymptotics for the no-trade region and value function derived.
Investigates how trading boundaries change with transaction costs in portfolio selection.
problem Investigates how trading boundaries vary with transaction costs in portfolio selection.
method Analyzes Merton's problem with proportional transaction costs, showing monotonicity of trading boundaries.
result Cost-adjusted trading boundaries are monotone in transaction costs, with implications for the Merton line.
The M and A transactions represent a wide range of unique business optimization opportunities in the corporate transformation deals, which are usually characterized by the high level of total risk. The M and A transactions can be successfully implemented by taking to an account the size of investments, purchase price, …
Dynkin Games and Israeli Optionsq-fin.PR
We start briefly surveying research on optimal stopping games since their introduction by E.B.Dynkin more than 40 years ago. Recent renewed interest to dynkin's games is due, in particular, to the study of Israeli (game) options introduced in 2000. We discuss the work on these options and related derivative securities …
Cohort analysis speeds up Bitcoin blockchain data queries.
problem Efficiently querying Bitcoin blockchain data for economic insights.
method Cohort analysis applied to Bitcoin transaction data.
result Creation of datasets and visualizations for key Bitcoin transaction indicators.
We study partial hedging for game options in markets with transaction costs bounded from below. More precisely, we assume that the investor's transaction costs for each trade are the maximum between proportional transaction costs and a fixed transaction costs. We prove that in the continuous time Black--Scholes (BS) mo…
Money flow models are essential tools to understand different economical phenomena, like saving propensities and wealth distributions. In spite of their importance, most of them are based on synthetic transaction networks with simple topologies, e.g. random or scale-free ones, as the characterisation of real networks i…
LineMVGNN improves AML detection by integrating multi-view graph learning.
problem Ineffective and scalable AML systems using rule-based methods.
method LineMVGNN combines multi-view graph neural networks with line-graph features.
result LineMVGNN outperforms state-of-the-art methods in detecting money laundering.
On-chain Peak Shavingecon.EM
Study on-chain peak shaving to reduce Ethereum transaction costs.
problem Reducing transaction costs in blockchain networks, especially during congested periods.
method Analyzing transaction-level data from multiple firms across various industries to understand scheduling responses and cost management strategies.
result Firms' scheduling responses to congestion vary, leading to different fee savings and residual costs.
A digital euro protocol offers complete privacy and offline transactions using Groth-Sahai proofs.
problem Fragile digital payment solutions with privacy and offline transaction issues.
method Design and implementation of a Central Bank Digital Currency (CBDC) using Groth-Sahai zero-knowledge proofs.
result Complete privacy and offline transaction capability with retroactive double-spending detection.
We consider a Nash equilibrium between two high-frequency traders in a simple market impact model with transient price impact and additional quadratic transaction costs. Extending a result by Schöneborn (2008), we prove existence and uniqueness of the Nash equilibrium and show that for small transaction costs the high-…