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Robust XVA. (arXiv:1808.04908v1 [q-fin.PR])

August 15, 2018 by Quantitative Finance at arXiv   Comments (0)

We introduce an arbitrage-free framework for robust valuation adjustments. An
investor trades a credit default swap portfolio with a defaultable
counterparty, but has incomplete information about her credit quality. By
constraining the actual default intensity of the counterparty within an
uncertainty interval, we derive both upper and lower bounds for the XVA
process. We show that these bounds may be recovered as solutions of nonlinear
ordinary differential equations. The presence of...

Brexit: The Belated Threat. (arXiv:1808.05142v1 [econ.GN])

August 15, 2018 by Quantitative Finance at arXiv   Comments (0)

Debates on an EU-leaving referendum arose in several member states after
Brexit. We want to highlight how the exit of an additional country affects the
power distribution in the Council of the European Union. We inspect the power
indices of the member states both with and without the country which might
leave the union. Our results show a pattern connected to a change in the
threshold of the number of member states required for a decision. An exit that
modifies this threshold benefits the...

Inventory Management for High-Frequency Trading with Imperfect Competition. (arXiv:1808.05169v1 [q-fin.TR])

August 15, 2018 by Quantitative Finance at arXiv   Comments (0)

We study Nash equilibria for inventory-averse high-frequency traders (HFTs),
who trade to exploit information about future price changes. For discrete
trading rounds, the HFTs' optimal trading strategies and their equilibrium
price impact are described by a system of nonlinear equations; explicit
solutions obtain around the continuous-time limit. Unlike in the risk-neutral
case, the optimal inventories become mean-reverting and vanish as the number of
trading rounds becomes large. In contrast,...

Dynamic Advisor-Based Ensemble (dynABE): Case Study in Stock Trend Prediction of Critical Metal Companies. (arXiv:1805.12111v3 [q-fin.ST] UPDATED)

August 15, 2018 by Quantitative Finance at arXiv   Comments (0)

The demand for metals by modern technology has been shifting from common base
metals to a variety of minor metals, such as cobalt or indium. The industrial
importance and limited geological availability of some minor metals have led to
them being considered more "critical," and there is a growing investment
interest in such critical metals and their producing companies. In this
research, we create a novel framework, Dynamic Advisor-Based Ensemble (dynABE),
for stock prediction and use critical...

Clips From Today’s Halftime Report

August 15, 2018 by The Reformed Broker   Comments (0)

The stocks you wanted to know about today from CNBC. Nvidia double-upgraded at Wells Fargo from CNBC. Final trades: Chinese stocks, Marsh & McLennan, Devon Energy & Apple from CNBC....

Deja Vu In Turkey: Currency Crisis and Corporate Insanity!

August 15, 2018 by Musings on Markets   Comments (0)

This has been a year of rolling crises, some originating in developed markets and some in emerging markets, and the market has been remarkably resilient through all of them. It is now Turkey's turn to be in the limelight, though not in a way it hoped to be, as the Turkish Lira enters what seems like a death spiral, that threatens to spill over into other emerging markets. There is plenty that can be said about the macro origins of this crisis, with Turkey's leaders and central bank bearing a...

Notes from the first Ray meetup

August 15, 2018 by The Practical Quant   Comments (0)

[A version of this post appears on the O'Reilly Radar.]Ray is beginning to be used to power large-scale, real-time AI applications.Machine learning adoption is accelerating due to the growing number of large labeled data sets, languages aimed at data scientists (R, Julia, Python), frameworks (scikit-learn, PyTorch, TensorFlow, etc.), and tools for building infrastructure to support end-to-end applications. While some interesting applications of unsupervised learning are beginning to emerge,...

A note on representation of BSDE-based dynamic risk measures and dynamic capital allocations. (arXiv:1808.04611v1 [q-fin.PM])

August 14, 2018 by Quantitative Finance at arXiv   Comments (0)

In this paper, we provide a representation theorem for dynamic capital
allocation under It{\^o}-L{\'e}vy model. We consider the representation of
dynamic risk measures defined under Backward Stochastic Differential Equations
(BSDE) with generators that grow quadratic-exponentially in the control
variables. Dynamic capital allocation is derived from the differentiability of
BSDEs with jumps. The results are illustrated by deriving a capital allocation
representation for dynamic entropic risk...

On the optimal investment-consumption and life insurance selection problem with an external stochastic factor. (arXiv:1808.04608v1 [q-fin.PM])

August 14, 2018 by Quantitative Finance at arXiv   Comments (0)

In this paper, we study a stochastic optimal control problem with stochastic
volatility. We prove the sufficient and necessary maximum principle for the
proposed problem. Then we apply the results to solve an investment, consumption
and life insurance problem with stochastic volatility, that is, we consider a
wage earner investing in one risk-free asset and one risky asset described by a
jump-diffusion process and has to decide concerning consumption and life
insurance purchase. We assume that...

Risk-based optimal portfolio of an insurer with regime switching and noisy memory. (arXiv:1808.04604v1 [q-fin.PM])

August 14, 2018 by Quantitative Finance at arXiv   Comments (0)

In this paper, we consider a risk-based optimal investment problem of an
insurer in a regime-switching jump diffusion model with noisy memory. Using the
model uncertainty modeling, we formulate the investment problem as a zero-sum,
stochastic differential delay game between the insurer and the market, with a
convex risk measure of the terminal surplus and the Brownian delay surplus over
a period $[T-\varrho,T]$. Then, by the BSDE approach, the game problem is
solved. Finally, we derive...