Investments
Quantum cognition machine learning: financial forecasting
A new paradigm for training machine learning algorithms based on quantum cognition is presented
The cost of mis-specifying price impact
Expected returns can be significantly affected by the wrong use of impact models
Optimal allocation to cryptocurrencies in diversified portfolios
Asset allocation methods assign positive weights to cryptos in diversified portfolios
Getting more for less: better A / B testing via causal regularisation
A causal machine learning algorithm is used to estimate trades’ price impact
Fat tails and optimal LDI portfolios
A portfolio optimisation technique for pension funds and insurance portfolios is presented
Trading the vol-of-vol risk premium
Applications of the vol-of-vol parameter for cross-asset derivatives are presented
Asset allocation with inverse reinforcement learning
Using reinforcement learning to help replicate asset managers' allocation strategy
Sculpting implied volatility surfaces of illiquid assets
From the stock cumulative distribution function an arbitrage-free volatility surface is derived
Linking performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
Optimal turnover, liquidity and autocorrelation
A novel optimal execution approach via continuous-time stochastic processes is introduced
Automated market-making for fiat currencies
A framework to exchange fiat currencies on-chain consistently with off-chain prices is presented
Liquidity stress-testing using optimal portfolio liquidation
A methodology to derive liquidation costs and times in OTC markets is proposed
Fat-tailed factors
Independent component analysis is proposed as an alternative to principal component analysis
Nonlinear risk decomposition for any type of fund
A risk decomposition by fund manager, factor or instrument is proposed
A principled approach to clean-up costs in algo trading
The opportunity cost associated with the cancelled portion of an order is quantified
Goal-based wealth management with reinforcement learning
A combination of machine learning techniques provides multi-period portfolio optimisation
Impact of hedging strategies on variable annuities
Put options may reduce the cost of hedging strategies for insurers
Zooming in on equity factor crowding
A measure for crowding in trades is derived from supply and demand imbalances
Time to move on from mean-variance diversification
A new diversification measure appears to produce better results than mean-variance optimisation
Equally diversified or equally weighted?
New diversification measure enables construction of equally diversified portfolios
Podcast: CFM’s Bouchaud on agent-based models and ESG investing
Hedge fund quant, and Risk.net’s new columnist, shares his unique take on markets