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We propose a top-down model for cash CLO. This model can consistently price cash CLO tranches both within the same deal and across different deals. Meaningful risk measures for cash CLO tranches can also be defined and computed. This method is self-consistent, easy to implement and computationally efficient. It has the potential to bring the much needed pricing transparency to the cash CLO markets; and it could also …
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation in the fixed income market: it is rather usual to find issuers that, besides liquid benchmark bonds, issue some other bonds that either are placed to a small number of investors in…
We present a dialogue on Counterparty Credit Risk touching on Credit Value at Risk (Credit VaR), Potential Future Exposure (PFE), Expected Exposure (EE), Expected Positive Exposure (EPE), Credit Valuation Adjustment (CVA), Debit Valuation Adjustment (DVA), DVA Hedging, Closeout conventions, Netting clauses, Collateral modeling, Gap Risk, Re-hypothecation, Wrong Way Risk, Basel III, inclusion of Funding costs, First t…
Trader-facing dynamic fees are increasingly proposed for automated market makers (AMMs), but historical data do not identify how order flow would respond: trader-facing fees do not vary, trader types are latent, and a replayed tape is not a sequential decision environment. We therefore construct a minimal closed-loop simulator in which the missing signal exists by construction: two constant-product pools repriced by …
In this work, we investigate a market making execution problem on a trading session in which a continuous phase on a limit order book is followed by a closing auction. Whereas standard optimal market making models typically rely on terminal inventory penalties to manage end-of-day risk, ignoring the significant liquidity events available in closing auctions, we propose a deep reinforcement learning framework, consist…
Market expectations about AI's economic impact may influence interest rates. Previous work has shown that US bond yields decline around the release of a sample of mostly proprietary AI models (Andrews and Farboodi 2025). I extend this analysis to include also open weight AI models that can be freely used and modified. I find long-term bond yields shift in opposite directions following the introduction of open versus …
A foundational approach is developed for a mathematical theory of managerial disclosure in relation to asset pricing; this involves both the earnings guidance disclosed by firm management and market `trackers' pricing the firm's exposure to quotable risks.
We derive explicit recursive formulas for Target Close (TC) and Implementation Shortfall (IS) in the Almgren-Chriss framework. We explain how to compute the optimal starting and stopping times for IS and TC, respectively, given a minimum trading size. We also show how to add a minimum participation rate constraint (Percentage of Volume, PVol) for both TC and IS. We also study an alternative set of risk measures for t…
We study equilibria in a closed, fee-free constant-function market maker (CFMM) economy with two assets and two traders. An interior state is a unilateral no-trade equilibrium exactly when the CFMM marginal price equals both traders' marginal rates of substitution. For an interior initial state, individually rational unilateral equilibria are Pareto optimal relative to the fixed CFMM invariant. A weak representative …
Investors interpret social disclosures from a risk perspective, yet relevant information can reach them through channels that differ sharply in regulatory enforcement and materiality: SEC filings, sustainability reports, or financial reports. We analyse how social disclosure via each channel relates to idiosyncratic risk. Studying S&P 1,500 constituents, we distinguish between initiated and continued disclosure along…
Human capital is a central organizational input, but standard financial data reveal little about firm-specific disruptions to workforce availability, cost, skills, and continuity. I construct a measure of disclosed human-capital disruption from earnings calls using author-defined coding criteria and a contextual language model. Within firms, a one-standard-deviation increase in the annual measure is associated with 0…
Crypto-listed equity perpetuals trade while the primary cash market is closed, yet still need a mark for margin, funding, and liquidation. We model the closed-window mark as the fixed point of an oracle operator with two blocks: external anchoring and self/peer derivative reference. From marks and proxies alone the two are observationally equivalent: every reduced form admits infinitely many topology decompositions, …
Heavy-tailed diffusion models replace Gaussian noise by a Gaussian variance mixture: denoising Levy probabilistic models (DLPM) take the mixing variables i.i.d. across coordinates, while Student-t EDM shares one mixing variable per sample. Neither has dynamics, yet temporal dependence of the noise amplitude - volatility clustering - is the defining stylized fact of financial returns. We introduce the Denoising Subord…
LLM agents are increasingly cast as autonomous portfolio managers, and benchmarks have moved from financial question-answering to sequential trading. Yet most still rank agents by returns over a fixed window, a weak proxy: the market path dominates a period's return, and apparent alpha can dissolve once look-ahead leakage is controlled. We introduce CLQT, which reframes closed-loop trading evaluation as diagnosis bef…
In this paper, I present the first comprehensive, around-the-clock analysis of systematic jump risk by combining high-frequency market data with contemporaneous news narratives identified as the underlying causes of market jumps. These narratives are retrieved and classified using a state-of-the-art open-source reasoning LLM. Decomposing market risk into interpretable jump categories reveals significant heterogeneity…
The proliferation of artificial intelligence (AI) in financial services has prompted growing demand for tools that can systematically detect AI-related disclosures in corporate filings. While prior approaches often rely on keyword expansion or document-level classification, they fall short in granularity, interpretability, and robustness. This study introduces FinAI-BERT, a domain-adapted transformer-based language m…
In this paper, we consider three stochastic-volatility models, each characterized by distinct dynamics of instantaneous volatility: (1) a CIR process for squared volatility (i.e., the classical Heston model); (2) a mean-reverting lognormal process for volatility; and (3) a CIR process for volatility. Previous research has provided semi-analytical approximations for these models in the form of simple (non-mean-reverti…
Central clearing counterparty houses (CCPs) play a fundamental role in mitigating the counterparty risk for exchange traded options. CCPs cover for possible losses during the liquidation of a defaulting member's portfolio by collecting initial margins from their members. In this article we analyze the current state of the art in the industry for computing initial margins for options, whose core component is generally…
CLIP jointly trains an image encoder and a text encoder so matched image–caption pairs are close in a shared space, enabling zero-shot visual classification by text prompts.
PPO is a policy-gradient algorithm that clips the probability ratio so each update stays close to the previous policy, giving much of TRPO’s stability with first-order SGD.
Crypto Liquidation Cascade — Forced closes amplifying moves when leverage clusters breach.
Short covering is buying to close a short — a rally driven by the short base shrinking, not by new longs arriving with a fundamental bid.
An externality is a cost or benefit imposed on a third party that is not priced in the original transaction — fire sales, contagion, and pollution are the same object in different clothes.
CLO Issuance — Structured credit supply that absorbs leveraged loans and shapes spread regimes.
Leveraged Loan Index — Floating-rate corporate credit sensitive to defaults, spreads, and CLO demand.
The 3M10Y Treasury curve compares 10-year Treasury yields with 3-month Treasury bill yields and is closely watched as a recession and policy-cycle indicator.
Copy (with a lag) the disclosed long holdings of selected 13F filers — a delayed clone of someone else’s book.
Buy closed-end funds at a wide discount to NAV and fade rich premiums — a stubborn retail-structure anomaly.
Harvest the close-to-open (overnight) equity premium, optionally gated by a sentiment filter — a timing of when the overnight edge is on.
Long the target (and short the acquirer in stock deals) after a bid, to harvest the spread if the deal closes.
Time BTC exposure to the clock — certain hours print more of the return than a 24/7 average would suggest.
The 3M10Y Treasury curve compares 10-year Treasury yields with 3-month Treasury bill yields and is closely watched as a recession and policy-cycle indicator.
Copy (with a lag) the disclosed long holdings of selected 13F filers — a delayed clone of someone else’s book.
CLIP jointly trains an image encoder and a text encoder so matched image–caption pairs are close in a shared space, enabling zero-shot visual classification by text prompts.
CLO Issuance — Structured credit supply that absorbs leveraged loans and shapes spread regimes.
Buy closed-end funds at a wide discount to NAV and fade rich premiums — a stubborn retail-structure anomaly.
Crypto Liquidation Cascade — Forced closes amplifying moves when leverage clusters breach.
An externality is a cost or benefit imposed on a third party that is not priced in the original transaction — fire sales, contagion, and pollution are the same object in different clothes.
Leveraged Loan Index — Floating-rate corporate credit sensitive to defaults, spreads, and CLO demand.
Harvest the close-to-open (overnight) equity premium, optionally gated by a sentiment filter — a timing of when the overnight edge is on.
Long the target (and short the acquirer in stock deals) after a bid, to harvest the spread if the deal closes.
Time BTC exposure to the clock — certain hours print more of the return than a 24/7 average would suggest.
PPO is a policy-gradient algorithm that clips the probability ratio so each update stays close to the previous policy, giving much of TRPO’s stability with first-order SGD.
Short covering is buying to close a short — a rally driven by the short base shrinking, not by new longs arriving with a fundamental bid.