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Quantitative Finance at arXiv wrote a new blog post titled Signatures of crypto-currency market decoupling from the Forex. (arXiv:1906.07834v1 [q-fin.ST])
Based on the high-frequency recordings from Kraken, a cryptocurrency exchange and professional trading platform that aims to bring Bitcoin and other cryptocurrencies into the mainstream, the multiscale cross-correlations involving the Bitcoin (BTC), Ethereum (ETH), Euro (EUR) and US dollar (USD) are studied over the period between July 1, 2016 and December 31, 2018. It is shown that the multiscaling characteristics of the exchange rate fluctuations related to the cryptocurrency market approach those of the Forex. This, in particular, applies to the BTC/ETH exchange rate, whose Hurst exponent...
11 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Evaluating the Performance of Machine Learning Algorithms in Financial Market Forecasting: A Comprehensive Survey. (arXiv:1906.07786v1 [q-fin.CP])
With increasing competition and pace in the financial markets, robust forecasting methods are becoming more and more valuable to investors. While machine learning algorithms offer a proven way of modeling non-linearities in time series, their advantages against common stochastic models in the domain of financial market prediction are largely based on limited empirical results. The same holds true for determining advantages of certain machine learning architectures against others. This study surveys more than 150 related articles on applying machine learning to financial market forecasting....
11 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Closed-form expansions with respect to the mixing solution for option pricing under stochastic volatility. (arXiv:1812.07803v3 [q-fin.MF] UPDATED)
We consider closed-form expansions for European put option prices within several stochastic volatility frameworks with time-dependent parameters. Our methodology involves writing the put option price as an expectation of a Black-Scholes formula and performing a second-order Taylor expansion around the mean of its argument. The difficulties then faced are computing a number of expectations induced by the Taylor expansion in a closed-form manner. We establish a fast calibration scheme under the assumption that the parameters are piecewise-constant. Furthermore, we perform a sensitivity analysis...
11 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Predicting Patent Citations to measure Economic Impact of Scholarly Research. (arXiv:1906.08244v1 [cs.DL])
A crucial goal of funding research and development has always been to advance economic development. On this basis, a consider-able body of research undertaken with the purpose of determining what exactly constitutes economic impact and how to accurately measure that impact has been published. Numerous indicators have been used to measure economic impact, although no single indicator has been widely adapted. Based on patent data collected from Altmetric we predict patent citations through various social media features using several classification models. Patents citing a research paper...
11 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Multi-Likelihood Methods for Developing Stock Relationship Networks Using Financial Big Data. (arXiv:1906.08088v1 [q-fin.ST])
Development of stock networks is an important approach to explore the relationship between different stocks in the era of big-data. Although a number of methods have been designed to construct the stock correlation networks, it is still a challenge to balance the selection of prominent correlations and connectivity of networks. To address this issue, we propose a new approach to select essential edges in stock networks and also maintain the connectivity of established networks. This approach uses different threshold values for choosing the edges connecting to a particular stock, rather than...
11 hours ago
The Reformed Broker wrote a new blog post titled Clip From Today’s Closing Bell
... The post Clip From Today’s Closing Bell appeared first on The Reformed Broker.
11 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Equilibrium Asset Pricing with Transaction Costs. (arXiv:1901.10989v2 [q-fin.PM] UPDATED)
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled forward-backward stochastic differential equations. We show that a unique solution generally exists provided that the agents' preferences are sufficiently similar. In a benchmark specification with linear state dynamics, the illiquidity discounts and liquidity premia observed empirically correspond to a positive relationship between transaction costs and volatility.
Quantitative Finance at arXiv wrote a new blog post titled The Impact of Ambiguity on the Optimal Exercise Timing of Integral Option Contracts. (arXiv:1906.07533v1 [q-fin.MF])
We consider the impact of ambiguity on the optimal timing of a class of two-dimensional integral option contracts when the exercise payoff is a positively homogeneous measurable function. Hence, the considered class of exercise payoffs includes discontinuous functions as well. We identify a parameterized family of excessive functions generating an appropriate class of supermartingales for the considered problems and then express the value of the optimal policy as well as the worst case measure in terms of these processes. The advantage of our approach is that it reduces the analysis of...
Quantitative Finance at arXiv wrote a new blog post titled Multiscale cross--correlations and triangular arbitrage opportunities in the Forex. (arXiv:1906.07491v1 [q-fin.ST])
Multifractal Detrended Cross-Correlation methodology is applied to the foreign exchange (Forex) market. High frequency fluctuations of exchange rates of eight major world currencies over the period 2010--2018 are used to study cross-correlations. The currencies include the Australian dollar, Canadian dollar, Swiss franc, euro, British pound sterling, Japanese yen, New Zealand dollar and US dollar. Dominant multiscale cross--correlations between the exchange rates are found to typically occur on the level of small and medium size fluctuations. Hierarchical organization of ties between the...
Quantitative Finance at arXiv wrote a new blog post titled When Risks and Uncertainties Collide: Mathematical Finance for Arbitrage Markets in a Quantum Mechanical View. (arXiv:1906.07164v1 [q-fin.RM])
Geometric Arbitrage Theory reformulates a generic asset model possibly allowing for arbitrage by packaging all assets and their forwards dynamics into a stochastic principal fibre bundle, with a connection whose parallel transport encodes discounting and portfolio rebalancing, and whose curvature measures, in this geometric language, the ''instantaneous arbitrage capability'' generated by the market itself. The asset and market portfolio dynamics have a quantum mechanical description, which is constructed by quantizing the deterministic version of the stochastic Lagrangian system describing a...
All About Alpha wrote a new blog post titled The Value of Speculation Limits, or Lack Thereof
CFTC Commissioner Daniel Berkovitz recently spoke to the FIA Commodities Symposium, in Houston, Texas, about the reduction of systemic risks and the strengthening of market integrity under the Dodd-Frank Act. He gave the usual disclaimer, that the views he expressed in this address were his own not those of theRead More
The Practical Quant wrote a new blog post titled The quest for high-quality data
[A version of this post appears on the O'Reilly Radar.]Machine learning solutions for data integration, cleaning, and data generation are beginning to emerge.By Ihab Ilyas and Ben Lorica.“AI starts with ‘good’ data” is a statement that receives wide agreement from data scientists, analysts, and business owners. There has been a significant increase in our ability to build complex AI models for predictions, classifications, and various analytics tasks, and there’s an abundance of (fairly easy-to-use) tools that allow data scientists and analysts to provision complex models within days. As...
2 days ago
The Reformed Broker wrote a new blog post titled FAQ: Where should a new investor begin?
In today's edition, Michael Batnick, Ben Carlson and Downtown Josh Brown answer a very simple question that doesn't necessarily have a simple answer. "Where should a new investor begin?"... The post FAQ: Where should a new investor begin? appeared first on The Reformed Broker.
2 days ago
Complexity Digest wrote a new blog post titled Localist plasticity identified by mutual information
The issue of memory is difficult for standard neural network models. Ubiquitous synaptic plasticity introduces the problem of interference, which limits pattern recall and introduces conflation errors. We present a lognormal recurrent neural network, load patterns into it (MNIST), and test the resulting neural representation for information content by an output classifier. We identify neurons, which ‘compress’ the pattern information into their own adjacency network, and by stimulating these achieve recall. Learning is limited to intrinsic plasticity and output synapses of these pattern...
2 days ago
The Reformed Broker wrote a new blog post titled Changing the Ratio
Wealth/Stack is an event that focuses on the future of the financial advisory profession. And in the future, the advisor base is going to look more like the demography of the United States. ... The post Changing the Ratio appeared first on The Reformed Broker.
2 days ago