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Quantitative Finance at arXiv wrote a new blog post titled Optimal management of pumped hydroelectric production with state constrained optimal control. (arXiv:1909.06854v1 [math.OC])
We present a novel technique to solve the problem of managing optimally a pumped hydroelectric storage system. This technique relies on representing the system as a stochastic optimal control problem with state constraints, these latter corresponding to the finite volume of the reservoirs. Following the recent level-set approach presented in O. Bokanowski, A. Picarelli, H. Zidani, "State-constrained stochastic optimal control problems via reachability approach", SIAM J. Control and Optim. 54 (5) (2016), we transform the original constrained problem in an auxiliary unconstrained one in...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled Personal Finance Decisions with Untruthful Advisors: an Agent-Based Model. (arXiv:1909.06759v1 [q-fin.CP])
Investors usually resort to financial advisors to improve their investment process until the point of complete delegation on investment decisions. Surely, financial advice is potentially a correcting factor in investment decisions but, in the past, the media and regulators blamed biased advisors for manipulating the expectations of naive investors. In order to give an analytic formulation of the problem, we present an Agent-Based Model formed by individual investors and a financial advisor. We parametrize the games by considering a compromise for the financial advisor (between a sufficient...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled Relation between non-exchangeability and measures of concordance of copulas. (arXiv:1909.06648v1 [math.ST])
An investigation is presented of how a comprehensive choice of five most important measures of concordance (namely Spearman's rho, Kendall's tau, Spearman's footrule, Gini's gamma, and Blomqvist's beta) relate to non-exchangeability, i.e., asymmetry on copulas. Besides these results, the method proposed also seems to be new and may serve as a raw model for exploration of the relationship between a specific property of a copula and some of its measures of dependence structure, or perhaps the relationship between various measures of dependence structure themselves. In order to simplify the view...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled Comparing the forecasting of cryptocurrencies by Bayesian time-varying volatility models. (arXiv:1909.06599v1 [econ.EM])
This paper studies the forecasting ability of cryptocurrency time series. This study is about the four most capitalized cryptocurrencies: Bitcoin, Ethereum, Litecoin and Ripple. Different Bayesian models are compared, including models with constant and time-varying volatility, such as stochastic volatility and GARCH. Moreover, some crypto-predictors are included in the analysis, such as S\&P 500 and Nikkei 225. In this paper the results show that stochastic volatility is significantly outperforming the benchmark of VAR in both point and density forecasting. Using a different type of...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled The Optimal Deterrence of Crime: A Focus on the Time Preference of DWI Offenders. (arXiv:1909.06509v1 [econ.GN])
We develop a general model for finding the optimal penal strategy based on the behavioral traits of the offenders. We focus on how the discount rate (level of time discounting) affects the criminal propensity on the individual level, and how the aggregation of these effects influences criminal activities on the population level. The effects are aggregated based on the distribution of discount rate among the population. We study this distribution empirically through a survey with 207 participants, and we show that it follows zero-inflated exponential distribution. We quantify the effectiveness...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled DeepTriangle: A Deep Learning Approach to Loss Reserving. (arXiv:1804.09253v4 [stat.AP] UPDATED)
We propose a novel approach for loss reserving based on deep neural networks. The approach allows for joint modeling of paid losses and claims outstanding, and incorporation of heterogeneous inputs. We validate the models on loss reserving data across lines of business, and show that they improve on the predictive accuracy of existing stochastic methods. The models require minimal feature engineering and expert input, and can be automated to produce forecasts more frequently than manual workflows.
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled An SFP--FCC Method for Pricing and Hedging Early-exercise Options under L\'evy Processes. (arXiv:1909.07319v1 [q-fin.CP])
This paper extends the Singular Fourier--Pad\'e (SFP) method proposed by Chan (2018) to pricing/hedging early-exercise options--Bermudan, American and discrete-monitored barrier options--under a L\'evy process. The current SFP method is incorporated with the Filon--Clenshaw--Curtis (FCC) rules invented by Dom\'inguez et al. (2011), and we call the new method SFP--FCC. The main purpose of using the SFP--FCC method is to require a small number of terms to yield fast error convergence and to formulate option pricing and option Greek curves rather than individual prices/Greek values. We also...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled EvaSylv: A user-friendly software to evaluate forestry scenarii including natural risk. (arXiv:1909.07288v1 [q-bio.PE])
Forest management relies on the evaluation of silviculture practices. The increase in natural risk due to climate change makes it necessary to consider evaluation criteria that take natural risk into account. Risk integration in existing software requires advanced programming skills.We propose a user-friendly software to simulate even-aged and monospecific forest at the stand level, in order to evaluate and optimize forest management. The software gives the possibility to run management scenarii with or without considering the impact of natural risk. The control variables are the dates and...
an hour ago
Quantitative Finance at arXiv wrote a new blog post titled Additive normal tempered stable processes for equity derivatives and power law scaling. (arXiv:1909.07139v1 [q-fin.MF])
We introduce a simple model for equity index derivatives. The model generalizes well known L\`evy Normal Tempered Stable processes (e.g. NIG and VG) with time dependent parameters. It accurately fits Equity index implied volatility surfaces in the whole time range of quoted instruments, including small time horizon (few days) and long time horizon options (years). We prove that the model is an Additive process that is constructed using an Additive subordinator. This allows us to use classical L\`evy-type pricing techniques. We discuss the calibration issues in detail and we show that, in...
an hour ago
The Reformed Broker wrote a new blog post titled Animal Spirits video coming to The Compound!
This week, we launched a new playlist on The Compound that will publish clips from Michael Batnick and Ben Carlson's red hot Animal Spirits podcast.... The post Animal Spirits video coming to The Compound! appeared first on The Reformed Broker.
5 hours ago
The Reformed Broker wrote a new blog post titled What Advisors Bring to the Table
Advisors themselves are highly aware of the multi-faceted approach to advice that clients are now looking for in the modern era.... The post What Advisors Bring to the Table appeared first on The Reformed Broker.
9 hours ago
Implementing QuantLib wrote a new blog post titled Implementing QuantLib is now available in Chinese
A bit of news: thanks to Ruilong Xu, Implementing QuantLib is now available from Leanpub in a Chinese translation.
21 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Comparative Company Stock Valuation through Financial Metrics. (arXiv:1909.06332v1 [q-fin.PM])
Out of the companies, Dolby is the company with the best overall financial and operation health. According to the table that accounted its financial statements for the past three years, Dolby has stable profit margins that generates a revenue in the billions, the only company in ten figures.
Quantitative Finance at arXiv wrote a new blog post titled Optimal investment and contingent claim valuation with exponential disutility under proportional transaction costs. (arXiv:1909.06260v1 [q-fin.MF])
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A dual representation is obtained for the associated disutility minimisation problem, together with a dynamic procedure for solving it. This leads to an efficient and convergent numerical procedure for indifference pricing which applies to a wide range of payoffs, a large range of time steps and all magnitudes of transaction costs.
Quantitative Finance at arXiv wrote a new blog post titled Shallow Self-Learning for Reject Inference in Credit Scoring. (arXiv:1909.06108v1 [stat.ML])
Credit scoring models support loan approval decisions in the financial services industry. Lenders train these models on data from previously granted credit applications, where the borrowers' repayment behavior has been observed. This approach creates sample bias. The scoring model (i.e., classifier) is trained on accepted cases only. Applying the resulting model to screen credit applications from the population of all borrowers degrades model performance. Reject inference comprises techniques to overcome sampling bias through assigning labels to rejected cases. The paper makes two...
Quantitative Finance at arXiv wrote a new blog post titled Generalized Duality for Model-Free Superhedging given Marginals. (arXiv:1909.06036v1 [q-fin.PR])
In a discrete-time financial market, a generalized duality is established for model-free superhedging, given marginal distributions of the underlying asset. Contrary to prior studies, we do not require contingent claims to be upper semicontinuous, allowing for upper semi-analytic ones. The generalized duality stipulates an extended version of risk-neutral pricing. To compute the model-free superhedging price, one needs to find the supremum of expected values of a contingent claim, evaluated not directly under martingale (risk-neutral) measures, but along sequences of measures that converge,...
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: ... The post This Week on TRB appeared first on The Reformed Broker.
3 days ago
The Reformed Broker wrote a new blog post titled Clips From Today’s Halftime Report
The day’s biggest movers in the blitz, including Cloudflare, Broadcom and more from CNBC. Goldman predicts 26% downside for Apple from CNBC. Over the course of this cycle, equity market should continue to move higher: CIO from CNBC. What’s going on with Ulta? How does Newell Brands look here? from CNBC. Final Trades: JPMorgan, US...... The post Clips From Today’s Halftime Report appeared first on The Reformed Broker.
3 days ago
Complexity Digest wrote a new blog post titled Bilateral relatedness: knowledge diffusion and the evolution of bilateral trade
During the last two decades, two important contributions have reshaped our understanding of international trade. First, countries trade more with those with whom they share history, language, and culture, suggesting that trade is limited by information frictions. Second, countries are more likely to start exporting products that are related to their current exports, suggesting that shared capabilities and knowledge diffusion constrain export diversification. Here, we join both of these streams of literature by developing three measures of bilateral relatedness and using them to ask whether...
3 days ago