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.
New distribution resolves excess volatility puzzle in finance.
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification effect on risk-sharing distortions that helps resolve the interest rate puzzle …
In this paper we address three main objections of behavioral finance to the theory of rational finance, considered as anomalies the theory of rational finance cannot explain: Predictability of asset returns, The Equity Premium, (The Volatility Puzzle. We offer resolutions of those objections within the rational finance…
SOC theory explains financial volatility and economic shocks.
Survey of continuous volatility models, focusing on fractional and rough methods.
Sophisticated volatility models outperform naive portfolio strategies.
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations under the volatility feedback effect by modeling the joint dynamics of stock price,…
New puzzles from geometry and topology.
This paper discusses a novel explanation for asymmetric volatility based on the anchoring behavioral pattern. Anchoring as a heuristic bias causes investors focusing on recent price changes and price levels, which two lead to a belief in continuing trend and mean-reversion respectively. The empirical results support ou…
We analyze higher-dimensional sliding puzzles, finding solvability patterns.
Unified theory explains market impact using a simplified supply-demand parameter.
Open geometry puzzles keep the author engaged.
Diversification return is an incremental return earned by a rebalanced portfolio of assets. The diversification return of a rebalanced portfolio is often incorrectly ascribed to a reduction in variance. We argue that the underlying source of the diversification return is the rebalancing, which forces the investor to se…
In this article we prove the impossibility of some disentanglement puzzles, first building mathematical models that reflect the essential characteristics of these puzzles.
This short review presents a selected history of the mutual fertilization between physics and economics, from Isaac Newton and Adam Smith to the present. The fundamentally different perspectives embraced in theories developed in financial economics compared with physics are dissected with the examples of the volatility…
The study uses equity order flow to forecast stock returns and resolves the liquidity premium puzzle.
This paper introduces the first deep neural network-based estimation metric for the jigsaw puzzle problem. Given two puzzle piece edges, the neural network predicts whether or not they should be adjacent in the correct assembly of the puzzle, using nothing but the pixels of each piece. The proposed metric exhibits an e…
New model solves equity premium puzzle with risk aversion coefficient.
We introduce Quintessence: a family of burr puzzles based on the geometry and combinatorics of the 120-cell. We discuss the regular polytopes, their symmetries, the dodecahedron as an important special case, the three-sphere, and the quaternions. We then construct the 120-cell, giving an illustrated survey of its geome…
New model solves equity premium puzzle.
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be used without relying on behavioral finance assumptions to model the predictabil…
Modeling financial chaos with market makers' risk appetite.
In his stimulating article on the reasons for two puzzling observations about the behaviour of interest rates, exchange rates and the rate of inflation, Charles Engel (2016) puts forward an explanation that rests on the concept of a non-pecuniary liquidity return on assets. Albeit intriguing the analysis struggles to a…
Algorithm finds characteristic maps over complex shapes.
Solves equity premium puzzle with time-varying variables.
Solved Dudeney's 100-year-old puzzle about triangle to square dissection.
The paper explains a geometry puzzle from Plato's Meno.
Globalization is one of the central concepts of our age. The common perception of the process is that, due to declining communication and transport costs, distance becomes less and less important. However, the distance coefficient in the gravity model of trade, which grows in time, indicates that the role of distance i…
Improved financial market calibration reveals large excess volatility.
This paper supplies two possible resolutions of Fortune's (2000) margin-loan pricing puzzle. Fortune (2000) noted that the margin loan interest rates charged by stock brokers are very high in relation to the actual (low) credit risk and the cost of funds. If we live in the Black-Scholes world, the brokers are presumabl…
Voluntary insurance contracts constitute a puzzle because they increase the expectation value of one party's wealth, whereas both parties must sign for such contracts to exist. Classically, the puzzle is resolved by introducing non-linear utility functions, which encode asymmetric risk preferences; or by assuming the p…
Fat tails in financial time series and increase of stocks cross-correlations in high volatility periods are puzzling facts that ask for new paradigms. Both points are of key importance in fundamental research as well as in Risk Management (where extreme losses play a key role). In this paper we present a new model for …
Understanding and reasoning about physics is an important ability of intelligent agents. We develop the PHYRE benchmark for physical reasoning that contains a set of simple classical mechanics puzzles in a 2D physical environment. The benchmark is designed to encourage the development of learning algorithms that are sa…
An edge tessellation is a tiling of the plane generated by reflecting a polygon in its edges. We prove that a polygon generating an edge tessellation is one the following eight types: a rectangle; an equilateral, 60-right, isosceles right, or 120-isosceles triangle; a 120-rhombus; a 60-90-120 kite; or a regular hexagon…
A new model for heterogeneous populations optimizes consumption and investment over short horizons.
Puzzle Mix optimizes mixup by leveraging saliency and local statistics.
Archaeologists are in dire need of automated object reconstruction methods. Fragments reassembly is close to puzzle problems, which may be solved by computer vision algorithms. As they are often beaten on most image related tasks by deep learning algorithms, we study a classification method that can solve jigsaw puzzle…
Financial markets provide a natural quantitative lab for understanding some of the most advanced human behaviours. Among them is the use of mathematical tools known as financial instruments. Besides money, the two most fundamental financial instruments are bonds and equities. More than 30 years ago Mehra and Prescott f…
Solves the equity premium puzzle without calibrated values.
A hybrid scheme uses GAs and DL for tile panel reconstruction.
Generating music medleys is about finding an optimal permutation of a given set of music clips. Toward this goal, we propose a self-supervised learning task, called the music puzzle game, to train neural network models to learn the sequential patterns in music. In essence, such a game requires machines to correctly sor…
New method makes robust estimators work without knowing corruption levels.
New financial price model using earning yield derived from CIR process.
Study on CEF discount in Bangladesh, finds size and maturity impact, turnover negative.
By using two different invariants for the Rubik's Magic puzzle, one of metric type, the other of topological type, we can dramatically reduce the universe of constructible configurations of the puzzle. Finding the set of actually constructible shapes remains however a challenging task, that we tackle by first reducing …
Chess engines Stockfish and LCZero differ in their approach to solving endgame puzzles.
We introduce two operations named biflip and puzzle-move on simple polytopes producing polytopes with diffeomorphic moment-angle manifolds.
Deep networks generalize well due to hidden mechanisms like renormalization.