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0.0

Jun 30, 2018
06/18

by
Andrey Itkin

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We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied volatilities which demonstrate smile or skew. An arbitrage-free calibration algorithm is considered that constructs the implied volatility surface as a grid in the strike-expiration space and guarantees a lack of arbitrage at every node of this grid. We also...

Topics: Quantitative Finance, Computational Finance, Mathematical Finance, General Finance

Source: http://arxiv.org/abs/1407.0256

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0.0

Jun 30, 2018
06/18

by
Abdelkoddousse Ahdida; AurÃ©lien Alfonsi; Ernesto Palidda

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We propose an affine extension of the Linear Gaussian term structure Model (LGM) such that the instantaneous covariation of the factors is given by an affine process on semidefinite positive matrices. First, we set up the model and present some important properties concerning the Laplace transform of the factors and the ergodicity of the model. Then, we present two main numerical tools to implement the model in practice. First, we obtain an expansion of caplets and swaptions prices around the...

Topics: Quantitative Finance, Computational Finance, Mathematical Finance

Source: http://arxiv.org/abs/1412.7412

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10.0

Jun 25, 2018
06/18

by
Randolph, Ryan P

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24 pages : 21 cm

Topics: Finance, Personal -- Juvenile literature, Finance, Personal, Finance, Personal, Personal finance

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0.0

Jun 30, 2018
06/18

by
Gabriele Ranco; Ilaria Bordino; Giacomo Bormetti; Guido Caldarelli; Fabrizio Lillo; Michele Treccani

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The new digital revolution of big data is deeply changing our capability of understanding society and forecasting the outcome of many social and economic systems. Unfortunately, information can be very heterogeneous in the importance, relevance, and surprise it conveys, affecting severely the predictive power of semantic and statistical methods. Here we show that the aggregation of web users' behavior can be elicited to overcome this problem in a hard to predict complex system, namely the...

Topics: Quantitative Finance, Statistical Finance, Computational Finance

Source: http://arxiv.org/abs/1412.3948

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0.0

Jun 30, 2018
06/18

by
Giulia Iori; Rosario N. Mantegna; Luca Marotta; Salvatore Micciche'; James Porter; Michele Tumminello

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Interbank markets are fundamental for bank liquidity management. In this paper, we introduce a model of interbank trading with memory. Our model reproduces features of preferential trading patterns in the e-MID market recently empirically observed through the method of statistically validated networks. The memory mechanism is used to introduce a proxy of trust in the model. The key idea is that a lender, having lent many times to a borrower in the past, is more likely to lend to that borrower...

Topics: Quantitative Finance, Statistical Finance, General Finance

Source: http://arxiv.org/abs/1403.3638

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0.0

Jun 30, 2018
06/18

by
Mikio Ito; Kiyotaka Maeda; Akihiko Noda

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This paper studies the interrelation between spot and futures prices in the two major rice markets in prewar Japan from the perspective of market efficiency. Applying a non-Bayesian time-varying model approach to the fundamental equation for spot returns and the futures premium, we detect when efficiency reductions in the two major rice markets occurred. We also examine how government interventions affected the rice markets in Japan, which colonized Taiwan and Korea before World War II, and...

Topics: Quantitative Finance, Statistical Finance, General Finance

Source: http://arxiv.org/abs/1404.5381

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0.0

Jun 30, 2018
06/18

by
Christoph Aymanns; Co-Pierre Georg

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When banks choose similar investment strategies the financial system becomes vulnerable to common shocks. We model a simple financial system in which banks decide about their investment strategy based on a private belief about the state of the world and a social belief formed from observing the actions of peers. Observing a larger group of peers conveys more information and thus leads to a stronger social belief. Extending the standard model of Bayesian updating in social networks, we show that...

Topics: Quantitative Finance, Computational Finance, General Finance, Economics

Source: http://arxiv.org/abs/1408.0440

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3.0

Jun 30, 2018
06/18

by
Menelaos Karanasos; Alexandros Paraskevopoulos; Faek Menla Ali; Michail Karoglou; Stavroula Yfanti

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We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the mean and volatility dynamics, including the underlying volatility persistence and volatility spillovers structure. Using daily data from several key stock market indices we find that stock market returns exhibit time varying persistence in their...

Topics: Quantitative Finance, Statistical Finance, General Finance

Source: http://arxiv.org/abs/1403.7179

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1.0

Jun 30, 2018
06/18

by
PaweÅ‚ Fiedor; Odd Magnus Trondrud

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Modelling financial time series as a time change of a simpler process has been proposed in various forms over the years. One of such recent approaches is called volatility homogenisation decomposition, and has been designed specifically to aid the forecasting of price changes on financial markets. The authors of this method have attempted to prove the its usefulness by applying a specific forecasting procedure and determining the effectiveness of this procedure on the decomposed time series, as...

Topics: Quantitative Finance, Statistical Finance, Computational Finance

Source: http://arxiv.org/abs/1406.7526

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1.0

Jun 30, 2018
06/18

by
Dong Han Kim; Stefano Marmi

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In this article we discuss the distribution of asset price movements by the market potential function. From the principle of free energy minimization we analyze two different kinds of market potentials. We obtain a U-shaped potential when market reversion (i.e. contrarian investors) is dominant. On the other hand, if there are more trend followers, flat and logarithmic--like potentials appeared. By using the Cyclical Adjusted Price-to-Earning ratio, which is a common valuation tool, we...

Topics: Quantitative Finance, Statistical Finance, General Finance

Source: http://arxiv.org/abs/1403.3138

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2.0

Jun 30, 2018
06/18

by
Marcio Laurini; Alberto Ohashi

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Principal Component Analysis (PCA) is the most common nonparametric method for estimating the volatility structure of Gaussian interest rate models. One major difficulty in the estimation of these models is the fact that forward rate curves are not directly observable from the market so that non-trivial observational errors arise in any statistical analysis. In this work, we point out that the classical PCA analysis is not suitable for estimating factors of forward rate curves due to the...

Topics: Quantitative Finance, Statistical Finance, Computational Finance

Source: http://arxiv.org/abs/1408.6279

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0.0

Jun 30, 2018
06/18

by
M. Duembgen; L. C. G. Rogers

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In the econometrics of financial time series, it is customary to take some parametric model for the data, and then estimate the parameters from historical data. This approach suffers from several problems. Firstly, how is estimation error to be quantified, and then taken into account when making statements about the future behaviour of the observed time series? Secondly, decisions may be taken today committing to future actions over some quite long horizon, as in the trading of derivatives; if...

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1401.5666

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3.0

Jun 30, 2018
06/18

by
Peter Klimek; Sebastian Poledna; J. Doyne Farmer; Stefan Thurner

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Since beginning of the 2008 financial crisis almost half a trillion euros have been spent to financially assist EU member states in taxpayer-funded bail-outs. These crisis resolutions are often accompanied by austerity programs causing political and social friction on both domestic and international levels. The question of how to resolve failing financial institutions under which economic preconditions is therefore a pressing and controversial issue of vast political importance. In this work we...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1403.1548

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1.0

Jun 30, 2018
06/18

by
Peter Sarlin

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This paper discusses the role of risk communication in macroprudential oversight and of visualization in risk communication. Beyond the soar in data availability and precision, the transition from firm-centric to system-wide supervision imposes vast data needs. Moreover, except for internal communication as in any organization, broad and effective external communication of timely information related to systemic risks is a key mandate of macroprudential supervisors, further stressing the...

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1404.4550

3
3.0

Jun 30, 2018
06/18

by
Xiaobing Feng; Haibo Hu

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The negative externalities from an individual bank failure to the whole system can be huge. One of the key purposes of bank regulation is to internalize the social costs of potential bank failures via capital charges. This study proposes a method to evaluate and allocate the systemic risk to different countries/regions using a SIR type of epidemic spreading model and the Shapley value in game theory. The paper also explores features of a constructed bank network using real globe-wide banking...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1404.5689

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0.0

Jun 30, 2018
06/18

by
Ersin Kantar; Alper Aslan; Bayram Deviren; Mustafa Keskin

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We investigate the hierarchical structures of countries based on electricity consumption and economic growth by using the real amounts of their consumption over a certain time period. We use of electricity consumption data to detect the topological properties of 60 countries from 1971 to 2008. These countries are divided into three subgroups: low income group, middle income group and high income group countries. Firstly, a relationship between electricity consumption and economic growth is...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1406.6562

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0.0

Jun 30, 2018
06/18

by
Frank Gehmlich; Thorsten Schmidt

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The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a unified view on both approaches. This is achieved by studying reduced-form approaches under weak assumptions. In particular we do not assume the global existence of a default intensity and allow default at fixed or predictable times with positive...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1411.4851

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0.0

Jun 30, 2018
06/18

by
Matthew Lorig

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We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for both the buyer's and seller's indifference price. For European calls on a traded asset, we translate indifference prices into an explicit approximation of the buyer's and seller's implied volatility surface. For European claims on a non-traded asset, we...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1412.5520

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0.0

Jun 30, 2018
06/18

by
Pierre Degond; Jian-Guo Liu; Christian Ringhofer

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We develop a model for the evolution of wealth in a non-conservative economic environment, extending a theory developed earlier by the authors. The model considers a system of rational agents interacting in a game theoretical framework. This evolution drives the dynamic of the agents in both wealth and economic configuration variables. The cost function is chosen to represent a risk averse strategy of each agent. That is, the agent is more likely to interact with the market, the more...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1403.7800

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0.0

Jun 30, 2018
06/18

by
Robert Azencott; Yutheeka Gadhyan; Roland Glowinski

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We consider assets for which price $X_t$ and squared volatility $Y_t$ are jointly driven by Heston joint stochastic differential equations (SDEs). When the parameters of these SDEs are estimated from $N$ sub-sampled data $(X_{nT}, Y_{nT})$, estimation errors do impact the classical option pricing PDEs. We estimate these option pricing errors by combining numerical evaluation of estimation errors for Heston SDEs parameters with the computation of option price partial derivatives with respect to...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1404.4014

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0.0

Jun 30, 2018
06/18

by
Pavel V. Shevchenko; Pierre Del Moral

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Sequential Monte Carlo (SMC) methods have successfully been used in many applications in engineering, statistics and physics. However, these are seldom used in financial option pricing literature and practice. This paper presents SMC method for pricing barrier options with continuous and discrete monitoring of the barrier condition. Under the SMC method, simulated asset values rejected due to barrier condition are re-sampled from asset samples that do not breach the barrier condition improving...

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1405.5294

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0.0

Jun 30, 2018
06/18

by
Nien-Lin Liu; Hoang-Long Ngo

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In order to study the geometry of interest rates market dynamics, Malliavin, Mancino and Recchioni [A non-parametric calibration of the HJM geometry: an application of It\^o calculus to financial statistics, {\it Japanese Journal of Mathematics}, 2, pp.55--77, 2007] introduced a scheme, which is based on the Fourier Series method, to estimate eigenvalues of a spot cross volatility matrix. In this paper, we present another estimation scheme based on the Quadratic Variation method. We first...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1409.2214

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0.0

Jun 30, 2018
06/18

by
K. Gad; J. L. Pedersen

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The main result of this paper is a probabilistic proof of the penalty method for approximating the price of an American put in the Black-Scholes market. The method gives a parametrized family of partial differential equations, and by varying the parameter the corresponding solutions converge to the price of an American put. For each PDE the parameter may be interpreted as a rationality parameter of the holder of the option. The method may be extended to other valuation situations given as an...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1410.1287

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0.0

Jun 30, 2018
06/18

by
Krzysztof Turek

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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 option in illiquid environment. We understand illiquidity as a non linear transaction cost function depending only on rate of change of our portfolio. In case this function...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1409.6042

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2.0

Jun 30, 2018
06/18

by
Minh Man Ngo; Huyen Pham

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This paper studies the problem of determining the optimal cut-off for pairs trading rules. We consider two correlated assets whose spread is modelled by a mean-reverting process with stochastic volatility, and the optimal pair trading rule is formulated as an optimal switching problem between three regimes: flat position (no holding stocks), long one short the other and short one long the other. A fixed commission cost is charged with each transaction. We use a viscosity solutions approach to...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1412.7649

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1.0

Jun 30, 2018
06/18

by
Stanislav S. Borysov; Alexander V. Balatsky

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We study historical correlations and lead-lag relationships between individual stock risk (volatility of daily stock returns) and market risk (volatility of daily returns of a market-representative portfolio) in the US stock market. We consider the cross-correlation functions averaged over all stocks, using 71 stock prices from the Standard \& Poor's 500 index for 1994--2013. We focus on the behavior of the cross-correlations at the times of financial crises with significant jumps of market...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1401.8106

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0.0

Jun 30, 2018
06/18

by
Dmitry Muravey

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I present the technique which can analyse some interest rate models: Constantinides-Ingersoll, CIR-model, geometric CIR and Geometric Brownian Motion. All these models have the unified structure of Whittaker function. The main focus of this text is closed-form solutions of the zero-coupon bond value in these models. In text I emphasize the specific details of mathematical methods of their determination such as Laplace transform and hypergeometric functions.

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1405.2459

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1.0

Jun 30, 2018
06/18

by
PaweÅ‚ Fiedor

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In our previous studies we have investigated the structural complexity of time series describing stock returns on New York's and Warsaw's stock exchanges, by employing two estimators of Shannon's entropy rate based on Lempel-Ziv and Context Tree Weighting algorithms, which were originally used for data compression. Such structural complexity of the time series describing logarithmic stock returns can be used as a measure of the inherent (model-free) predictability of the underlying price...

Topics: Quantitative Finance, Statistical Finance, Computational Finance

Source: http://arxiv.org/abs/1408.3728

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1.0

Jun 30, 2018
06/18

by
Jun-jie Chen; Bo Zheng; Lei Tan

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Background: For complex financial systems, the negative and positive return-volatility correlations, i.e., the so-called leverage and anti-leverage effects, are particularly important for the understanding of the price dynamics. However, the microscopic origination of the leverage and anti-leverage effects is still not understood, and how to produce these effects in agent-based modeling remains open. On the other hand, in constructing microscopic models, it is a promising conception to...

Topics: Quantitative Finance, Statistical Finance, General Finance

Source: http://arxiv.org/abs/1407.5258

1
1.0

Jun 30, 2018
06/18

by
PaweÅ‚ Fiedor

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In our previous study we have presented an approach to studying lead--lag effect in financial markets using information and network theories. Methodology presented there, as well as previous studies using Pearson's correlation for the same purpose, approached the concept of lead--lag effect in a naive way. In this paper we further investigate the lead--lag effect in financial markets, this time treating them as causal effects. To incorporate causality in a manner consistent with our previous...

Topics: Quantitative Finance, Statistical Finance, Computational Finance

Source: http://arxiv.org/abs/1407.5020

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0.0

Jun 30, 2018
06/18

by
F. Bagarello; E. Haven

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In a very simple stock market, made by only two \emph{initially equivalent} traders, we discuss how the information can affect the performance of the traders. More in detail, we first consider how the portfolios of the traders evolve in time when the market is \emph{closed}. After that, we discuss two models in which an interaction with the outer world is allowed. We show that, in this case, the two traders behave differently, depending on \textbf{i)} the amount of information which they...

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1402.6204

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0.0

Jun 30, 2018
06/18

by
Y. LempÃ©riÃ¨re; C. Deremble; T. T. Nguyen; P. Seager; M. Potters; J. P. Bouchaud

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We present extensive evidence that ``risk premium'' is strongly correlated with tail-risk skewness but very little with volatility. We introduce a new, intuitive definition of skewness and elicit an approximately linear relation between the Sharpe ratio of various risk premium strategies (Equity, Fama-French, FX Carry, Short Vol, Bonds, Credit) and their negative skewness. We find a clear exception to this rule: trend following has both positive skewness and positive excess returns. This is...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1409.7720

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0.0

Jun 30, 2018
06/18

by
Tim Leung; Xin Li; Zheng Wang

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This paper analyzes the problem of starting and stopping a Cox-Ingersoll-Ross (CIR) process with fixed costs. In addition, we also study a related optimal switching problem that involves an infinite sequence of starts and stops. We establish the conditions under which the starting-stopping and switching problems admit the same optimal starting and/or stopping strategies. We rigorously prove that the optimal starting and stopping strategies are of threshold type, and give the analytical...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1411.6080

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0.0

Jun 30, 2018
06/18

by
Luxi Chen

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The Lax-Hopf formula simplifies the value function of an intertemporal optimization (infinite dimensional) problem associated with a convex transaction-cost function which depends only on the transactions (velocities) of a commodity evolution: it states that the value function is equal to the marginal fonction of a finite dimensional problem with respect to durations and average ransactions, much simpler to solve. The average velocity of the value function on a investment temporal window is...

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1401.1610

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0.0

Jun 30, 2018
06/18

by
Jozef Barunik; Evzen Kocenda; Lukas Vacha

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We detect and quantify asymmetries in volatility spillovers using the realized semivariances of petroleum commodities: crude oil, gasoline, and heating oil. During the 1987--2014 period we document increasing spillovers from volatility among petroleum commodities that substantially change after the 2008 financial crisis. The increase in volatility spillovers correlates with the progressive financialization of the commodities. In terms of asymmetries in spillovers we show that periods of...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1405.2445

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0.0

Jun 30, 2018
06/18

by
Xiaoxiao Zheng; Xin Zhang

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In this paper, we consider the optimal dividend problem for a company. We describe the surplus process of the company by a diffusion model with regime switching. The aim of the company is to choose a dividend policy to maximize the expected total discounted payments until ruin. In this article, we consider a hybrid dividend strategy, that is, the company is allowed to conduct continuous dividend strategy as well as impulsive dividend strategy. In addition, we consider the change of economy,...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1406.7606

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0.0

Jun 30, 2018
06/18

by
Andrei Lebedev; Petr Zabreiko

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In the article a strenthened version of the 'Fundamental Theorem of asset Pricing' for one-period market model is proven. The principal role in this result play total and nonanihilating cones.

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1412.7058

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3.0

Jun 30, 2018
06/18

by
Xiaolin Luo; Pavel V. Shevchenko

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There is a vast literature on numerical valuation of exotic options using Monte Carlo, binomial and trinomial trees, and finite difference methods. When transition density of the underlying asset or its moments are known in closed form, it can be convenient and more efficient to utilize direct integration methods to calculate the required option price expectations in a backward time-stepping algorithm. This paper presents a simple, robust and efficient algorithm that can be applied for pricing...

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1408.6938

6
6.0

Jul 7, 2015
07/15

by
Sears, Michael, 1950- author

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Includes an excerpt from Long way down

Topics: Finance, Murder, Finance, Murder

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0.0

Jun 30, 2018
06/18

by
Archil Gulisashvili

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The main object of study in the paper is the distance from a point to a line in the Riemannian manifold associated with the Heston model. We reduce the problem of computing such a distance to certain minimization problems for functions of one variable over finite intervals. One of the main ideas in this paper is to use a new system of coordinates in the Heston manifold and the level sets associated with this system. In the case of a vertical line, the formulas for the distance to the line are...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1409.6027

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3.0

Jun 30, 2018
06/18

by
Diane Wilcox; Tim Gebbie

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Hierarchical analysis is considered and a multilevel model is presented in order to explore causality, chance and complexity in financial economics. A coupled system of models is used to describe multilevel interactions, consistent with market data: the lowest level is occupied by agents generating the prices of individual traded assets; the next level entails aggregation of stocks into markets; the third level combines shared risk factors with information variables and bottom-up,...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1408.5585

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0.0

Jun 30, 2018
06/18

by
Gani Aldashev; Serik Aldashev; Timoteo Carletti

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Recent research in economic theory attempts to study optimal economic growth and spatial location of economic activity in a unified framework. So far, the key result of this literature - asymptotic convergence, even in the absence of decreasing returns to capital - relies on specific assumptions about the objective of the social planner. We show that this result does not depend on such restrictive assumptions and obtains for a broader class of objective functions. We also generalize this...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1401.4887

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0.0

Jun 30, 2018
06/18

by
Wai-Ki Ching; Jia-Wen Gu; Harry Zheng

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In this paper, we study a continuous time structural asset value model for two correlated firms using a two-dimensional Brownian motion. We consider the situation of incomplete information, where the information set available to the market participants includes the default time of each firm and the periodic asset value reports. In this situation, the default time of each firm becomes a totally inaccessible stopping time to the market participants. The original structural model is first...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1409.1393

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1.0

Jun 30, 2018
06/18

by
David Hobson; Yeqi Zhu

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The subject of this paper is an optimal consumption/optimal portfolio problem with transaction costs and with multiple risky assets. In our model the transaction costs take a special form in that transaction costs on purchases of one of the risky assets (the endowed asset) are infinite, and transaction costs involving the other risky assets are zero. Effectively, the endowed asset can only be sold. In general, multi-asset optional consumption/optimal portfolio problems are very challenging, but...

Topics: Quantitative Finance, Mathematical Finance

Source: http://arxiv.org/abs/1409.8037

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0.0

Jun 30, 2018
06/18

by
Edit Rroji; Lorenzo Mercuri

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In this paper we introduce a new parametric distribution, the Mixed Tempered Stable. It has the same structure of the Normal Variance Mean Mixtures but the normality assumption leaves place to a semi-heavy tailed distribution. We show that, by choosing appropriately the parameters of the distribution and under the concrete specification of the mixing random variable, it is possible to obtain some well-known distributions as special cases. We employ the Mixed Tempered Stable distribution which...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1405.7603

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0.0

Jun 30, 2018
06/18

by
Mehdi Lallouache; Damien Challet

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Many fits of Hawkes processes to financial data look rather good but most of them are not statistically significant. This raises the question of what part of market dynamics this model is able to account for exactly. We document the accuracy of such processes as one varies the time interval of calibration and compare the performance of various types of kernels made up of sums of exponentials. Because of their around-the-clock opening times, FX markets are ideally suited to our aim as they allow...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1406.3967

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Jun 30, 2018
06/18

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Marcelo M. de Oliveira; Alexandre C. L. Almeida

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Speculative bubbles have been occurring periodically in local or global real estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present paper, we employ a recently proposed...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1401.7615

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Jun 30, 2018
06/18

by
Fernando F. Ferreira; A. Christian Silva; Ju-Yi Yen

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In the past 20 years, momentum or trend following strategies have become an established part of the investor toolbox. We introduce a new way of analyzing momentum strategies by looking at the information ratio (IR, average return divided by standard deviation). We calculate the theoretical IR of a momentum strategy, and show that if momentum is mainly due to the positive autocorrelation in returns, IR as a function of the portfolio formation period (look-back) is very different from momentum...

Topics: Quantitative Finance, Statistical Finance

Source: http://arxiv.org/abs/1402.3030

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Jun 30, 2018
06/18

by
Annika Birch; Tomaso Aste

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We report a study of a stylized banking cascade model investigating systemic risk caused by counter party failure using liabilities and assets to define banks' balance sheet. In our stylized system, banks can be in two states: normally operating or distressed and the state of a bank changes from normally operating to distressed whenever its liabilities are larger than the banks' assets. The banks are connected through an interbank lending network and, whenever a bank is distressed, its creditor...

Topics: Quantitative Finance, General Finance

Source: http://arxiv.org/abs/1402.3688

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Jun 30, 2018
06/18

by
Elisa Appolloni; Andrea Ligori

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We propose an efficient lattice procedure which permits to obtain European and American option prices under the Black and Scholes model for digital options with barrier features. Numerical results show the accuracy of the proposed method.

Topics: Quantitative Finance, Computational Finance

Source: http://arxiv.org/abs/1401.2900