The Complete MoneyScience Reloaded

Blog Post: iMFdirect: Emerging Market Corporate Debt in Foreign Currencies

Thu, 01 Oct 2015 14:06:39 +0000

Event: Investor Behavior: The Psychology of Risk - Free Webinar from Victor Ricciardi

Thu, 01 Oct 2015 10:12:59 +0000

Location: Online; Date: October 30th, 2015;

Professor Ricciardi discusses behavioral finance, the psychology behind risk-taking, what makes individuals feel the way they do when making financial judgments, and how understanding our cognitive (mental) and affective (emotional) issues makes us better decision makers. He also highlights important issues from his current book Investor Behavior: The Psychology of Financial Planning and Investing with co-editor H. Kent Baker.

Published / Preprint: 01Oct/Report on the regulatory consistency of risk-weighted assets for counterparty credit risk issued by the Basel Committee

Thu, 01 Oct 2015 09:07:38 +0000

Press release about the report on the regulatory consistency of risk-weighted assets for counterparty credit risk issued by the Basel Committee, October 2015

Blog Post: TheAlephBlog: Book Review: The Art of Execution

Thu, 01 Oct 2015 08:56:07 +0000

Published / Preprint: Dynamics of multivariate default system in random environment. (arXiv:1509.09133v1 [q-fin.RM])

Thu, 01 Oct 2015 00:38:04 +0000

We consider a multivariate default system where random environmental information is available. We study the dynamics of the system in a general setting and adopt the point of view of change of probability measures. We also make a link with the density approach in the credit risk modelling. In the particular case where no environmental information is concerned, we pay a special attention to the phenomenon of system weakened by failures as in the classical reliability system.

Vendor News: September 30, 2015 - More than half of large insurers to increase use of cloud and co-sourcing services over next five years finds SS&C survey

Wed, 30 Sep 2015 14:27:45 +0000

Published / Preprint: 30Sep/Basel III implementation assessment of the Kingdom of Saudi Arabia published by Basel Committee

Wed, 30 Sep 2015 09:05:39 +0000

Press release about Basel III implementation assessments of Saudi Arabia by the Basel Committee (30 September 2015)

Blog Post: ThePracticalQuant: Hardcore Data Science, NYC 2015

Wed, 30 Sep 2015 02:56:23 +0000

Ben Recht and I hosted another great edition of Hardcore Data Science in NYC yesterday. From the very first talk, the room was full, the audience was attentive, and the energy in the room was high â and it remained that way throughout the day.

Hereâs a link to my Twitter summary.

Published / Preprint: Volume Weighted Average Price Optimal Execution. (arXiv:1509.08503v1 [q-fin.TR])

Wed, 30 Sep 2015 00:37:17 +0000

We study the problem of optimal execution of a trading order under Volume Weighted Average Price (VWAP) benchmark, from the point of view of a risk-averse broker. The problem consists in minimizing mean-variance of the slippage, with quadratic transaction costs. We devise multiple ways to solve it, in particular we study how to incorporate the information coming from the market during the schedule. Most related works in the literature eschew the issue of imperfect knowledge of the total market volume. We instead incorporate it in our model. We validate our method with extensive simulation of order execution on real NYSE market data. Our proposed solution, using a simple model for market volumes, reduces by 10% the VWAP deviation RMSE of the standard "static" solution (and can simultaneously reduce transaction costs).

Published / Preprint: Maximum likelihood estimators for a jump-type Heston model. (arXiv:1509.08869v1 [math.ST])

Wed, 30 Sep 2015 00:37:15 +0000

We study asymptotic properties of maximum likelihood estimators of drift parameters for a jump-type Heston model based on continuous time observations of the price process together with its jump part. We prove strong consistency and asymptotic normality for all admissible parameter values except one, where we show only weak consistency and non-normal asymptotic behavior. We also present some simulations to illustrate our results.

Blog Post: Luigi.Ballabio: QuantLib notebook: term structures and reference dates

Tue, 29 Sep 2015 05:35:27 +0000

Published / Preprint: Optimal trading strategies - a time series approach. (arXiv:1509.07953v1 [q-fin.PM])

Tue, 29 Sep 2015 00:54:38 +0000

Motivated by recent advances in the spectral theory of auto-covariance matrices, we are led to revisit a reformulation of Markowitz' mean-variance portfolio optimization approach in the time domain. In its simplest incarnation it applies to a single traded asset and allows to find an optimal trading strategy which - for a given return - is minimally exposed to market price fluctuations. The model is initially investigated for a range of synthetic price processes, taken to be either second order stationary, or to exhibit second order stationary increments. Attention is paid to consequences of estimating auto-covariance matrices from small finite samples, and auto-covariance matrix cleaning strategies to mitigate against these are investigated. Finally we apply our framework to real world data.

Published / Preprint: Asymmetry of cross correlations between intra-day and overnight volatilities. (arXiv:1509.08079v1 [q-fin.ST])

Tue, 29 Sep 2015 00:54:35 +0000

We point out a stunning time asymmetry in the short time cross correlations between intra-day and overnight volatilities (absolute values of log-returns of stock prices). While overnight volatility is significantly (and positively) correlated with the intra-day volatility during the \textit{following} day (allowing thus non-trivial predictions), it is much less correlated with the intra-day volatility during the \textit{preceding} day. While the effect is not unexpected in view of previous observations, its robustness and extreme simplicity are remarkable.

Published / Preprint: Performance v. Turnover: A Story by 4,000 Alphas. (arXiv:1509.08110v1 [q-fin.PM])

Tue, 29 Sep 2015 00:54:30 +0000

We analyze empirical data for 4,000 real-life trading portfolios (U.S. equities) with holding periods of about 0.7-19 trading days. We find a simple scaling C ~ 1/T, where C is cents-per-share, and T is the portfolio turnover. Thus, the portfolio return R has no statistically significant dependence on the turnover T. We also find a scaling R ~ V^X, where V is the portfolio volatility, and the power X is around 0.8-0.85 for holding periods up to 10 days or so. To our knowledge, this is the only publicly available empirical study on such a large number of real-life trading portfolios/alphas.

Published / Preprint: Correctness of Backtest Engines. (arXiv:1509.08248v1 [q-fin.TR])

Tue, 29 Sep 2015 00:54:23 +0000

In recent years several trading platforms appeared which provide a backtest engine to calculate historic performance of self designed trading strategies on underlying candle data. The construction of a correct working backtest engine is, however, a subtle task as shown by Maier-Paape and Platen (cf. arXiv:1412.5558 [q-fin.TR]). Several platforms are struggling on the correctness.

Published / Preprint: Representation and approximation of ambit fields in Hilbert space. (arXiv:1509.08272v1 [math.PR])

Tue, 29 Sep 2015 00:54:02 +0000

We lift ambit fields as introduced by Barndorff-Nielsen and Schmiegel to a class of Hilbert space-valued volatility modulated Volterra processes. We name this class Hambit fields, and show that they can be expressed as a countable sum of weighted real-valued volatility modulated Volterra processes. Moreover, Hambit fields can be interpreted as the boundary of the mild solution of a certain first order stochastic partial differential equation. This stochastic partial differential equation is formulated on a suitable Hilbert space of functions on the positive real line with values in the state space of the Hambit field. We provide an explicit construction of such a space. Finally, we apply this interpretation of Hambit fields to develop a finite difference scheme, for which we prove convergence under some Lipschitz conditions.

Published / Preprint: Sticky processes, local and true martingales. (arXiv:1509.08280v1 [q-fin.MF])

Tue, 29 Sep 2015 00:53:39 +0000

We prove that for a so-called sticky process $S$ there exists an equivalent probability $Q$ and a $Q$-martingale $\tilde{S}$ that is arbitrarily close to $S$ in $L^p$ norm. For continuous $S$, $\tilde{S}$ can be chosen arbitrarily close to $S$ in supremum norm. In the case where $S$ is a local martingale we may choose $Q$ arbitrarily close to the original probability in the total variation norm. We provide examples to illustrate the power of our results and present applications in mathematical finance.

Published / Preprint: High-frequency limit of Nash equilibria in a market impact game with transient price impact. (arXiv:1509.08281v1 [q-fin.TR])

Tue, 29 Sep 2015 00:53:01 +0000

We study the high-frequency limits of strategies and costs in a Nash equilibrium for two agents that are competing to minimize liquidation costs in a discrete-time market impact model with exponentially decaying price impact and quadratic transaction costs of size $\theta\ge0$. We show that, for $\theta=0$, equilibrium strategies and costs will oscillate indefinitely between two accumulation points. For $\theta>0$, however, both strategies and costs will converge towards limits that are independent of $\theta$. We then show that the limiting strategies form a Nash equilibrium for a continuous-time version of the model with $\theta$ equal to a certain critical value $\theta^*>0$, and that the corresponding expected costs coincide with the high-frequency limits of the discrete-time equilibrium costs. For $\theta\neq\theta^*$, however, continuous-time Nash equilibria will typically not exist. Our results permit us to give mathematically rigorous proofs of numerical observations made in Schied and Zhang [arXiv:1305.4013, 2013]. In particular, we provide a range of model parameters for which the limiting expected costs of both agents are decreasing functions of $\theta$. That is, for sufficiently high trading speed, raising additional transaction costs can reduce the expected costs of all agents.

Published / Preprint: The spatial component of R&D networks. (arXiv:1509.08291v1 [physics.soc-ph])

Tue, 29 Sep 2015 00:52:08 +0000

We study the role of geography in R&D networks by means of a quantitative, micro-geographic approach. Using a large database that covers international R&D collaborations from 1984 to 2009, we localize each actor precisely in space through its latitude and longitude. This allows us to analyze the R&D network at all geographic scales simultaneously. Our empirical results show that despite the high importance of the city level, transnational R&D collaborations at large distances are much more frequent than expected from similar networks. This provides evidence for the ambiguity of distance in economic cooperation which is also suggested by the existing literature. In addition we test whether the hypothesis of local buzz and global pipelines applies to the observed R&D network by calculating well-defined metrics from network theory.

Published / Preprint: Auto enrolment, pension trusts and ethical finance: Banks and regulators have an increasing role in promoting Shariah finance

Mon, 28 Sep 2015 09:45:31 +0000

Published / Preprint: General investorsâ views of information sources in Bangladesh

Mon, 28 Sep 2015 09:45:30 +0000

Published / Preprint: AML compliance â A banking nightmare? The HSBC case study

Mon, 28 Sep 2015 09:45:27 +0000

Published / Preprint: The effects of corporate disclosure practices on firm performance, risk and dividend policy

Mon, 28 Sep 2015 09:45:23 +0000

Published / Preprint: The impact of company size and multiple directorships on corporate governance effectiveness

Mon, 28 Sep 2015 09:45:20 +0000

Vendor News: Fidessa launches Sentinel Trading Compliance

Mon, 28 Sep 2015 08:08:03 +0000

Published / Preprint: Quadratic Hawkes processes for financial prices. (arXiv:1509.07710v1 [q-fin.TR])

Mon, 28 Sep 2015 00:37:11 +0000

We introduce and establish the main properties of QHawkes ("Quadratic" Hawkes) models. QHawkes models generalize the Hawkes price models introduced in E. Bacry et al. (2014), by allowing all feedback effects in the jump intensity that are linear and quadratic in past returns. A non-parametric fit on NYSE stock data shows that the off-diagonal component of the quadratic kernel indeed has a structure that standard Hawkes models fail to reproduce. Our model exhibits two main properties, that we believe are crucial in the modelling and the understanding of the volatility process: first, the model is time-reversal asymmetric, similar to financial markets whose time evolution has a preferred direction. Second, it generates a multiplicative, fat-tailed volatility process, that we characterize in detail in the case of exponentially decaying kernels, and which is linked to Pearson diffusions in the continuous limit. Several other interesting properties of QHawkes processes are discussed, in particular the fact that they can generate long memory without necessarily be at the critical point. Finally, we provide numerical simulations of our calibrated QHawkes model, which is indeed seen to reproduce, with only a small amount of quadratic non-linearity, the correct magnitude of fat-tails and time reversal asymmetry seen in empirical time series.

Blog Post: PatrickBurns: US market portrait 2015 week 39

Sat, 26 Sep 2015 07:25:43 +0000

US large cap market returns.

Blog Post: NumericalAlgorithmsGroup: Life Service Award 2015 ' David Sayers

Thu, 24 Sep 2015 11:26:43 +0000

The NAG Life Service Recognition Award has been running for 5 years â it was created in NAGâs 40th year as a way of showing gratitude to people that have dedicated immense time and commitment to the company.

It was a pleasure to see David Sayers, NAG Honorarium, receive the award at our recent AGM. As has become customary, James Davenport, Professor of Information Technology, University of Bath, presented David with the award and said one colleague wrote of David as follows, âDavid has been an outstanding ambassador for NAG for over forty years. For many customers, he has been the face of NAG - someone that they recognise and relate to, because of his many trips outside the office in the role of sales support. His interactions with NAG collaborators have been many and varied."

A code contributor wrote âDavid is, I believe, the main reason many of us contributed software to the early library. He came to our meetings, he listened and encouraged us, indeed he was one of us".
ï»¿

Professor James Davenport presenting David Sayers with the NAG Life Service Recognition Award 2015

The Big Short Trailer (2015) ‐ Paramount Pictures

Tue, 22 Sep 2015 15:55:29 +0000

#Trailer for Upcoming Movie, The Big Short: http://t.co/oVRpj36WTC — Risk Management (@Risk_Mgmt) September 22, 2015

Vendor News: Infosys Positioned as a Leader and Star Performer in 2015 Banking Application Outsourcing PEAK Matrixâ¢ by Everest

Tue, 22 Sep 2015 10:06:10 +0000

Infosys, (NYSE: INFY), a global leader in consulting, technology, outsourcing and next-generation services, has been positioned as a Leader and Star Performer in the 2015 PEAK Matrixâ¢ for banking application outsourcing (AO) by Everest Group. The consulting and research firm also positioned Infosys as a Leader in capital markets for the second consecutive year.