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Quantitative Finance at arXiv wrote a new blog post titled Portfolio Optimization with Entropic Value-at-Risk. (arXiv:1708.05713v1 [q-fin.PM])
The entropic value-at-risk (EVaR) is a new coherent risk measure, which is an upper bound for both the value-at-risk (VaR) and conditional value-at-risk (CVaR). As important properties, the EVaR is strongly monotone over its domain and strictly monotone over a broad sub-domain including all continuous distributions, while well-known monotone risk measures, such as VaR and CVaR lack these properties. A key feature for a risk measure, besides its financial properties, is its applicability in large-scale sample-based portfolio optimization. If the negative return of an investment portfolio is...
10 hours ago
Quantitative Finance at arXiv wrote a new blog post titled BSDEs with weak reflections and partial hedging of American options. (arXiv:1708.05957v1 [math.OC])
We introduce a new class of \textit{Backward Stochastic Differential Equations with weak reflections} whose solution $(Y,Z)$ satisfies the weak constraint $\textbf{E}[\Psi(\theta,Y_\theta)] \geq m,$ for all stopping time $\theta$ taking values between $0$ and a terminal time $T$, where $\Psi$ is a random non-decreasing map and $m$ a given threshold. We study the wellposedness of such equations and show that the family of minimal time $t$-values $Y_t$ can be aggregated by a right-continuous process. We give a nonlinear Mertens type decomposition for lower reflected $g$-submartingales, which to...
10 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Economic Design of Memory-Type Control Charts: The Fallacy of the Formula Proposed by Lorenzen and Vance (1986). (arXiv:1708.06160v1 [stat.AP])
The memory-type control charts, such as EWMA and CUSUM, are powerful tools for detecting small quality changes in univariate and multivariate processes. Many papers on economic design of these control charts use the formula proposed by Lorenzen and Vance (1986) [Lorenzen, T. J., & Vance, L. C. (1986). The economic design of control charts: A unified approach. Technometrics, 28(1), 3-10, DOI: 10.2307/1269598]. This paper shows that this formula is not correct for memory-type control charts and its values can significantly deviate from the original values even if the ARL values used in this...
10 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Fake News in Social Networks. (arXiv:1708.06233v1 [cs.AI])
We model the spread of news as a social learning game on a network. Agents can either endorse or oppose a claim made in a piece of news, which itself may be either true or false. Agents base their decision on a private signal and their neighbors' past actions. Given these inputs, agents follow strategies derived via multi-agent deep reinforcement learning and receive utility from acting in accordance with the veracity of claims. Our framework yields strategies with agent utility close to a theoretical, Bayes optimal benchmark, while remaining flexible to model re-specification. Optimized...
10 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Quantum Barro--Gordon Game in Monetary Economics. (arXiv:1708.05689v1 [q-fin.EC])
Classical game theory addresses decision problems in multi-agent environment where one rational agent's decision affects other agents' payoffs. Game theory has widespread application in economic, social and biological sciences. In recent years quantum versions of classical games have been proposed and studied. In this paper, we consider a quantum version of the classical Barro-Gordon game which captures the problem of time inconsistency in monetary economics. Such time inconsistency refers to the temptation of weak policy maker to implement high inflation when the public expects low...
yesterday
Falkenblog wrote a new blog post titled How to Set Up Your Own Bitcoin/Ethereum IRA
For the past couple of centuries technology empowered the state, put more things under its control. They have ultimate custody of all your financial assets, and custody is nine-tenths of the law. You simply can't hold $1M in financial assets in a form where 'The Man' can't grab it if he finds you an enemy of the state, which in many states includes righteous men.But like so many things the effect is not linear, in that now technology is putting power back in individuals. We can now take classes online, and be evaluated objectively via tests, making Universities less important. We no...
2 days ago
Complexity Digest wrote a new blog post titled What we get wrong about technology
Blade Runner (1982) is a magnificent film, but there’s something odd about it. The heroine, Rachael, seems to be a beautiful young woman. In reality, she’s a piece of technology — an organic robot designed by the Tyrell Corporation. She has a lifelike mind, imbued with memories extracted from a human being.  So sophisticated is Rachael that she is impossible to distinguish from a human without specialised equipment; she even believes herself to be human. Los Angeles police detective Rick Deckard knows otherwise; in Rachael, Deckard is faced with an artificial...
2 days ago
Complexity Digest wrote a new blog post titled Social influence on 5-year survival in a longitudinal chemotherapy ward co-presence network
Chemotherapy is often administered in openly designed hospital wards, where the possibility of patient–patient social influence on health exists. Previous research found that social relationships influence cancer patient’s health; however, we have yet to understand social influence among patients receiving chemotherapy in the hospital. We investigate the influence of co-presence in a chemotherapy ward. We use data on 4,691 cancer patients undergoing chemotherapy in Oxfordshire, United Kingdom who average 59.8 years of age, and 44% are Male. We construct a network of patients where...
3 days ago
Complexity Digest wrote a new blog post titled How your mind protects you against hallucinations
More than 300 years ago, the philosopher René Descartes asked a disturbing question: If our senses can’t always be trusted, how can we separate illusion from reality? We’re able to do so, a new study suggests, because our brain keeps tabs on reality by constantly questioning its own past expectations and beliefs. Hallucinations occur when this internal fact-checking fails, a finding that could point toward better treatments for schizophrenia and other psychiatric disorders. Source: www.sciencemag.org
3 days ago
The Reformed Broker wrote a new blog post titled This Week on TRB
These were the most read posts on the site this week, in case you missed it: ...
3 days ago
The Reformed Broker wrote a new blog post titled Everyone Gets Arbed Eventually
How could you think this wasn't going to happen?...
4 days ago
Complexity Digest wrote a new blog post titled Corrupting cooperation and how anti-corruption strategies may backfire
Understanding how humans sustain cooperation in large, anonymous societies remains a central question of both theoretical and practical importance. In the laboratory, experimental behavioural research using tools like public goods games suggests that cooperation can be sustained by institutional punishment—analogous to governments, police forces and other institutions that sanction free-riders on behalf of individuals in large societies1,2,3. In the real world, however, corruption can undermine the effectiveness of these institutions4,5,6,7,8. Levels of corruption correlate with...
4 days ago
Quantitative Finance at arXiv wrote a new blog post titled An indifference approach to the cost of capital constraints: KVA and beyond. (arXiv:1708.05319v1 [q-fin.RM])
The strengthening of capital requirements has induced banks and traders to consider charging a so called capital valuation adjustment (KVA) to the clients in OTC transactions. This roughly corresponds to charge the clients ex-ante the profit requirement that is asked to the trading desk. In the following we try to delineate a possible way to assess the impact of capital constraints in the valuation of a deal. We resort to an optimisation stemming from an indifference pricing approach, and we study both the linear problem from the point of view of the whole bank and the non-linear problem...
4 days ago
Quantitative Finance at arXiv wrote a new blog post titled How many paths to simulate correlated Brownian motions?. (arXiv:1708.05352v1 [math.PR])
We provide an explicit formula giving the optimal number of paths needed to simulate two correlated Brownian motions.
4 days ago
Complexity Digest wrote a new blog post titled Spatiotemporal Network Markers of Individual Variability in the Human Functional Connectome
Functional connectivity (FC) analysis has revealed stable and reproducible features of brain network organization, as well as their variations across individuals. Here, we localize network markers of individual variability in FC and track their dynamical expression across time. First, we determine the minimal set of network components required to identify individual subjects. Among specific resting-state networks, we find that the FC pattern of the frontoparietal network allows for the most reliable identification of individuals. Looking across the whole brain, an optimization approach...
4 days ago