Quantitative Finance Collector is a blog on Quantitative finance analysis, methods in mathematical finance focusing on derivative pricing, quantitative trading and quantitative risk management.
Mar
5
Friday again, just a final kind remind, since Change of Friday Reading List Setting, I have been updating Friday reading list on page articles, for example, the list of this week includes:
1, Testing for Asymmetric Dependence, http://www.bepress.com/snde/vol14/iss2/art2/;
2, Index-Exciting CAViaR: A New Empirical Time-Varying Risk Model, http://www.bepress.com/snde/vol14/iss2/art1/;
3, Improving Portfolio Selection Using Option-Implied Volatility and Skewness , http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1559642;
4, Trading Activity and Bid-Ask Spreads of Individual Equity Options, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1553222;
5, The Method of Simulated Quantiles, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1561185
Keep an eye on page articles.
1, Testing for Asymmetric Dependence, http://www.bepress.com/snde/vol14/iss2/art2/;
2, Index-Exciting CAViaR: A New Empirical Time-Varying Risk Model, http://www.bepress.com/snde/vol14/iss2/art1/;
3, Improving Portfolio Selection Using Option-Implied Volatility and Skewness , http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1559642;
4, Trading Activity and Bid-Ask Spreads of Individual Equity Options, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1553222;
5, The Method of Simulated Quantiles, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1561185
Keep an eye on page articles.
Feb
26
I made a small change to the Friday reading list section by adding a new category Articles, which can be easily seen above at the menu bar. So from now on all recommended paper, together with shared interesting articles, will not be shown on the main page any more but rather under separated Articles category . For one thing, this movement facilitates my sharing process, I don't have to add paper/articles to my reading list only on Friday; for another, since not all people like reading technical paper, they can now choose not to see them at all, which is especially a benefit to blog feed readers as the reading list will "disappear" from update.
Also, please consider sharing to your friends if you think this blog is useful by bookmarking at the right sidebar button or linking to us if possible, I do appreciate your 10 seconds support.
Have a nice weekend.
Also, please consider sharing to your friends if you think this blog is useful by bookmarking at the right sidebar button or linking to us if possible, I do appreciate your 10 seconds support.
Have a nice weekend.
Feb
19
1, Market Timing & Trading Strategies Using Asset Rotation, "In this paper we present empirical results on the statistical and economic viability of a market timing trading strategy that is based on rotation between two risky assets. We use data on Exchange Traded Funds (ETFs) and models for both the returns and the volatility of the underlying assets." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1537914
2, Hedging the Black Swan: Conditional Heteroskedasticity and Tail Dependence in S&P500 and Vix, "In this paper, we show how the conditional approach of Heffernan and Tawn (2004) can be implemented to model extremal dependence between financial time series. A hedging example based on VIX futures is used to demonstrate its flexibility and superiority against the conventional OLS regression approach." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1549164
3, Stability of Mean-Variance Portfolio Weights, "The mean-variance portfolio weights are known to be strongly affected by the estimation errors of the parameters of asset distribution. Our paper studies this phenomenon from a new angle. We distil the stability measurements of separate coordinates of portfolio weights estimator into a single number. We derive analytical formulas that relate this measure with the mean and the covariance matrix of asset returns." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1553073
4, Unusual News Events and the Cross-Section of Stock Returns, "We show that stocks that experience a sudden increase in idiosyncratic volatility earn abnormally high contemporaneous returns but significantly underperform otherwise similar stocks in the future." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1362121
5, Exact Simulation of Point Processes with Stochastic Intensities, "This paper develops a method for the exact simulation of point processes with stochastic intensities. The method is based on a change of the filtration that describes the information flow in the point process model." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1551647
2, Hedging the Black Swan: Conditional Heteroskedasticity and Tail Dependence in S&P500 and Vix, "In this paper, we show how the conditional approach of Heffernan and Tawn (2004) can be implemented to model extremal dependence between financial time series. A hedging example based on VIX futures is used to demonstrate its flexibility and superiority against the conventional OLS regression approach." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1549164
3, Stability of Mean-Variance Portfolio Weights, "The mean-variance portfolio weights are known to be strongly affected by the estimation errors of the parameters of asset distribution. Our paper studies this phenomenon from a new angle. We distil the stability measurements of separate coordinates of portfolio weights estimator into a single number. We derive analytical formulas that relate this measure with the mean and the covariance matrix of asset returns." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1553073
4, Unusual News Events and the Cross-Section of Stock Returns, "We show that stocks that experience a sudden increase in idiosyncratic volatility earn abnormally high contemporaneous returns but significantly underperform otherwise similar stocks in the future." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1362121
5, Exact Simulation of Point Processes with Stochastic Intensities, "This paper develops a method for the exact simulation of point processes with stochastic intensities. The method is based on a change of the filtration that describes the information flow in the point process model." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1551647
Feb
12
Tomorrow is the last day of this lunar year, wish all of you and me happy Chinese lunar new year.
抬板凳看春晚
1, Modeling the Cross Section of Stock Returns: A Model Pooling Approach, "This paper illustrates the advantages of a model pooling approach in contrast to model selection. Model pools of several asset pricing models including the CAPM, the Fama-French (1993) three-factor model, and the Carhart (1997) four-factor model are considered for the purpose of forming expectations (i.e., predictions) of the one-step-ahead returns for a cross section of stock portfolios." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1536050;
2, Option Pricing with Piecewise-Constant Parameters, Discrete Jumps and Regime-Switching, "In this paper, I address systematically how to enhance the most existing option models with piecewise-constant parameters, and how to derive the corresponding closed-form characteristic function under the risk-neutral measure. As long as the characteristic function with piecewise-constant parameters is analytical known, the pricing formula for a European call is then given by inverse transform of the derived characteristic function." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1547036;
3, Comparison of Numerical and Analytical Approximations of the Early Exercise Boundary of the American Put Option, "In this paper we present qualitative and quantitative comparison of various analytical and numerical approximation methods for calculating a position of the early exercise boundary of the American put option paying zero dividends." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1547783;
4, Multivariate GARCH Models with Correlation Clustering, "This paper proposes a new clustered correlation multivariate GARCH model (CC-MGARCH) that allows conditional correlations to form clusters. This model can generalize the time-varying correlation structure in Tse and Tsui (2002) by determining a natural grouping of the correlations among the series." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548408;
5, Efficient Derivative Pricing by the Extended Method of Moments, "The local conditional moment restrictions are of special relevance in derivative pricing for reconstructing the pricing operator at a given day, by using the information in a few cross-sections of observed traded derivative prices and a time series of underlying asset returns." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1550135.
抬板凳看春晚
1, Modeling the Cross Section of Stock Returns: A Model Pooling Approach, "This paper illustrates the advantages of a model pooling approach in contrast to model selection. Model pools of several asset pricing models including the CAPM, the Fama-French (1993) three-factor model, and the Carhart (1997) four-factor model are considered for the purpose of forming expectations (i.e., predictions) of the one-step-ahead returns for a cross section of stock portfolios." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1536050;
2, Option Pricing with Piecewise-Constant Parameters, Discrete Jumps and Regime-Switching, "In this paper, I address systematically how to enhance the most existing option models with piecewise-constant parameters, and how to derive the corresponding closed-form characteristic function under the risk-neutral measure. As long as the characteristic function with piecewise-constant parameters is analytical known, the pricing formula for a European call is then given by inverse transform of the derived characteristic function." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1547036;
3, Comparison of Numerical and Analytical Approximations of the Early Exercise Boundary of the American Put Option, "In this paper we present qualitative and quantitative comparison of various analytical and numerical approximation methods for calculating a position of the early exercise boundary of the American put option paying zero dividends." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1547783;
4, Multivariate GARCH Models with Correlation Clustering, "This paper proposes a new clustered correlation multivariate GARCH model (CC-MGARCH) that allows conditional correlations to form clusters. This model can generalize the time-varying correlation structure in Tse and Tsui (2002) by determining a natural grouping of the correlations among the series." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548408;
5, Efficient Derivative Pricing by the Extended Method of Moments, "The local conditional moment restrictions are of special relevance in derivative pricing for reconstructing the pricing operator at a given day, by using the information in a few cross-sections of observed traded derivative prices and a time series of underlying asset returns." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1550135.
Feb
5
Several good working paper have been found this week, hope you will also enjoy them.
1, Quant Nugget 1: Square-Root Rule, Covariances and Ellipsoids: How to Analyze and Visualize the Propagation Law of Risk in a Multi-Dimensional Market, "How to analyze and visualize the propagation law of risk in a multi-dimensional market.", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548162;
2, Variance Swap Portfolio Theory, "Optimal portfolios of variance swaps are constructed taking account of both autocorrelation and cross asset dependencies. Market prices of variance swaps are extracted from option surface calibrations. The methods developed permit simulation of cash flows to arbitrary portfolios of variance swaps. The optimal design maximizes the index of acceptability introduced in Cherny and Madan (2009).", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1540815;
3, Efficient Options Pricing Using the Fast Fourier Transform , "The Fourier transform methods provide the valuable and indispensable tools for option pricing under L´evy processes since the analytic representation of the haracteristic function of the underlying asset return is more readily available than that of the density function itself. When used together with the FFT algorithms, real time pricing of a wide range of option models under L'evy processes can be delivered using the Fourier transform approach with highaccuracy, efficiency and reliability." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1534544;
4, Interest Rates and The Credit Crunch: New Formulas and Market Models , "We start by describing the major changes that occurred in the quotes of market rates after the 2007 subprime mortgage crisis. We comment on their lost analogies and consistencies, and hint on a possible, simple way to formally reconcile them. We then show how to price interest rate swaps under the new market practice of using different curves for generating future LIBOR rates and for discounting cash flows. Straightforward modifications of the market formulas for caps and swaptions will also be derived. " http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1332205;
5, How Do Individual Investors Trade? , "This paper examines how high-frequency trading decisions (especially the choice of market versus limit orders) of individual investors are influenced by past price changes. Specifically, we address the question whether trading decisions to open or close a position are different in the case in which investors already hold a position than in the case in which they don't.", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1538760;
6, Optimisation in Financial Engineering , "We discuss the precision with which financial models are handled, in particular optimisation models. We argue that precision is only required to a level that is justified by the overall accuracy of the model. Hence, the required precision should be specifically analysed, so to better appreciate the usefulness and limitations of a model." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1547173
1, Quant Nugget 1: Square-Root Rule, Covariances and Ellipsoids: How to Analyze and Visualize the Propagation Law of Risk in a Multi-Dimensional Market, "How to analyze and visualize the propagation law of risk in a multi-dimensional market.", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1548162;
2, Variance Swap Portfolio Theory, "Optimal portfolios of variance swaps are constructed taking account of both autocorrelation and cross asset dependencies. Market prices of variance swaps are extracted from option surface calibrations. The methods developed permit simulation of cash flows to arbitrary portfolios of variance swaps. The optimal design maximizes the index of acceptability introduced in Cherny and Madan (2009).", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1540815;
3, Efficient Options Pricing Using the Fast Fourier Transform , "The Fourier transform methods provide the valuable and indispensable tools for option pricing under L´evy processes since the analytic representation of the haracteristic function of the underlying asset return is more readily available than that of the density function itself. When used together with the FFT algorithms, real time pricing of a wide range of option models under L'evy processes can be delivered using the Fourier transform approach with highaccuracy, efficiency and reliability." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1534544;
4, Interest Rates and The Credit Crunch: New Formulas and Market Models , "We start by describing the major changes that occurred in the quotes of market rates after the 2007 subprime mortgage crisis. We comment on their lost analogies and consistencies, and hint on a possible, simple way to formally reconcile them. We then show how to price interest rate swaps under the new market practice of using different curves for generating future LIBOR rates and for discounting cash flows. Straightforward modifications of the market formulas for caps and swaptions will also be derived. " http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1332205;
5, How Do Individual Investors Trade? , "This paper examines how high-frequency trading decisions (especially the choice of market versus limit orders) of individual investors are influenced by past price changes. Specifically, we address the question whether trading decisions to open or close a position are different in the case in which investors already hold a position than in the case in which they don't.", http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1538760;
6, Optimisation in Financial Engineering , "We discuss the precision with which financial models are handled, in particular optimisation models. We argue that precision is only required to a level that is justified by the overall accuracy of the model. Hence, the required precision should be specifically analysed, so to better appreciate the usefulness and limitations of a model." http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1547173
