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Higher order approximation of call option prices under stochastic volatility models. (arXiv:1905.06315v1 [q-fin.CP])

May 15, 2019 by Quantitative Finance at arXiv   Comments (0)

In the present paper, a decomposition formula for the call price due to
Al\`{o}s is transformed into a Taylor type formula containing an infinite
series with stochastic terms. The new decomposition may be considered as an
alternative to the decomposition of the call price found in a recent paper of
Al\`{o}s, Gatheral and Radoi\v{c}i\'{c}. We use the new decomposition to obtain
various approximations to the call price in the Heston model with sharper
estimates of the error term than in the...

Real-Time Carbon Accounting Method for the European Electricity Markets. (arXiv:1812.06679v3 [physics.soc-ph] UPDATED)

May 15, 2019 by Quantitative Finance at arXiv   Comments (0)

Electricity accounts for 25% of global greenhouse gas emissions. Reducing
emissions related to electricity consumption requires accurate measurements
readily available to consumers, regulators and investors. In this case study,
we propose a new real-time consumption-based accounting approach based on flow
tracing. This method traces power flows from producer to consumer thereby
representing the underlying physics of the electricity system, in contrast to
the traditional input-output models of...

How To Spend Your Marketing Dollars Wisely

May 15, 2019 by The Reformed Broker   Comments (0)

Josh Brown talks to advertising expert Greg March, founder of New York media agency Noble People, about recent trends in the world of marketing and corporate ad spending.... The post How To Spend Your Marketing Dollars Wisely appeared first on The Reformed Broker.

Why Bitcoin Just Doubled

May 15, 2019 by The Reformed Broker   Comments (0)

Today on the mini pod I asked my friend, fellow advisor and crypto currency expert Tyrone Ross. We talked about what's happening... The post Why Bitcoin Just Doubled appeared first on The Reformed Broker.

Asset Pricing with Heterogeneous Beliefs and Illiquidity. (arXiv:1905.05730v1 [q-fin.MF])

May 14, 2019 by Quantitative Finance at arXiv   Comments (0)

This paper studies the equilibrium price of an asset that is traded in
continuous time between N agents who have heterogeneous beliefs about the state
process underlying the asset's payoff. We propose a tractable model where
agents maximize expected returns under quadratic costs on inventories and
trading rates. The unique equilibrium price is characterized by a weakly
coupled system of linear parabolic equations which shows that holding and
liquidity costs play dual roles. We derive the...

A Solvable Two-dimensional Optimal Stopping Problem in the Presence of Ambiguity. (arXiv:1905.05429v1 [q-fin.MF])

May 14, 2019 by Quantitative Finance at arXiv   Comments (0)

According to conventional wisdom, ambiguity accelerates optimal timing by
decreasing the value of waiting in comparison with the unambiguous benchmark
case. We study this mechanism in a multidimensional setting and show that in a
multifactor model ambiguity does not only influence the rate at which the
underlying processes are expected to grow, it also affects the rate at which
the problem is discounted. This mechanism where nature also selects the rate at
which the problem is discounted cannot...

Merton's portfolio problem with power utility under Volterra Heston model. (arXiv:1905.05371v1 [q-fin.PM])

May 14, 2019 by Quantitative Finance at arXiv   Comments (0)

This paper investigates Merton's portfolio problem in a rough stochastic
environment described by Volterra Heston model. The model has a non-Markovian
and non-semimartingale structure. By considering an auxiliary random process,
we solve the portfolio optimization problem with the martingale optimality
principle. The optimal strategy is derived in a semi-closed form that depends
on the solution of a Riccati-Volterra equation. Numerical studies suggest that
investment demand decreases with the...

On the consistency of jump-diffusion dynamics for FX rates under inversion. (arXiv:1905.05310v1 [q-fin.MF])

May 14, 2019 by Quantitative Finance at arXiv   Comments (0)

In this note we investigate the consistency under inversion of jump diffusion
processes in the Foreign Exchange (FX) market. In other terms, if the EUR/USD
FX rate follows a given type of dynamics, under which conditions will USD/EUR
follow the same type of dynamics? In order to give a numerical description of
this property, we first calibrate a Heston model and a SABR model to market
data, plotting their smiles together with the smiles of the reciprocal
processes. Secondly, we determine a...

Sustainable Investing and the Cross-Section of Maximum Drawdown. (arXiv:1905.05237v1 [q-fin.ST])

May 14, 2019 by Quantitative Finance at arXiv   Comments (0)

We use supervised learning to identify factors that predict the cross-section
of maximum drawdown for stocks in the US equity market. Our data run from
January 1980 to June 2018 and our analysis includes ordinary least squares,
penalized linear regressions, tree-based models, and neural networks. We find
that the most important predictors tended to be consistent across models, and
that non-linear models had better predictive power than linear models.
Predictive power was higher in calm periods...

Approximation of Optimal Transport problems with marginal moments constraints. (arXiv:1905.05663v1 [math.PR])

May 14, 2019 by Quantitative Finance at arXiv   Comments (0)

Optimal Transport (OT) problems arise in a wide range of applications, from
physics to economics. Getting numerical approximate solution of these problems
is a challenging issue of practical importance. In this work, we investigate
the relaxation of the OT problem when the marginal constraints are replaced by
some moment constraints. Using Tchakaloff's theorem, we show that the Moment
Constrained Optimal Transport problem (MCOT) is achieved by a finite discrete
measure. Interestingly, for...