Investments
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
Spotting co-movement breakdowns with neural networks
Autoencoders can detect changes in relationship between assets in real time
Detecting changes in asset co-movement using autoencoders
ARR aims to anticipate volatility patterns to provide signals for risk management and trading
A closed-form solution for optimal mean-reverting strategies
The heat potentials method is used to find the optimal profit-taking and stop-loss levels
Stay ahead of the fixing lag
The price of fund-linked derivatives depends on the fixing lag of the underlying funds
A triptych approach for reverse stress testing of complex portfolios
Pascal Traccucci et al present an extended reverse stress test triptych approach with three variables
Forecasting value-at-risk
Alvin Stroyny and Tim Wilding build a dynamic risk framework for multi-asset global portfolios
Beyond Markowitz with quantum annealing
Venturelli and Kondratyev use quantum annealers to optimise portfolios
Tying allocation to selection
Hamza Bahaji introduces a new approach to core-satellite investing, the compound portfolio insurance
Black was right: price is within a factor 2 of value
CFM’s quants verify Fisher Black’s intuition on mean reversion still applies today
Emerging market corporate bonds as first-to-default baskets
Modified Merton model offers insights on EM corporate debt
Curve dynamics with artificial neural networks
Artificial neural networks can replace PCA for yield curves analysis