Papers, wiki, Option Blackboard, encyclopedia, and cards.
In FX cash markets, market makers provide liquidity to clients for a wide variety of currency pairs. Because of flow uncertainty and market volatility, they face inventory risk. To mitigate this risk, they typically skew their prices to attract or divert the flow and trade with their peers on the dealer-to-dealer segment of the market for hedging purposes. This paper offers a mathematical framework to FX dealers will…
We solve the superhedging problem for European options in an illiquid extension of the Black-Scholes model, in which transactions have transient price impact and the costs and the strategies for hedging are affected by physical or cash settlement requirements at maturity. Our analysis is based on a convenient choice of reduced effective coordinates of magnitudes at liquidation for geometric dynamic programming. The p…
This paper studies a modular cash-overlay rule for allocating between a fixed growth-defensive risky sleeve R and interest-bearing cash C. The risky sleeve is a static 50/50 combination of equal-weight growth/technology and defensive income/value ETF baskets; the target is future R-C return, with the cash leg earning the contemporaneous cash rate. Two independent filters are tested. The slow-tail filter maps continuo…
A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual term, as a remedy to the inherent right-censoring of real-world `incomplete' portfolios. Two techniques, a simple probabilistic model as well as an eight-state Markov chain, are used …
A first attempt at obtaining market--directional information from a non--stationary solution of the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. We demonstrate that the concept of price impact is poorly applicable to market dynamics. Instead, we consider the execution flow $I=dV/dt$ operator with the "impact from the future" term providi…
This study examines active liquidity management by Indian open-ended equity mutual funds. We find that fund managers respond to inflows by increasing cash holdings, which are later used to purchase less-liquid stocks at favourable valuations. Funds with less liquid portfolios tend to maintain larger cash reserves to manage flows. Funds that make active liquidity choices yield statistically and economically significan…
The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of market making has yet to be mathematically formulated in terms of volatility in the existing literature. We provide here a preliminary derivation of the payoff formula, by making the…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo algorithm to incorporate switching costs, corresponding to transaction costs and transient liquidity costs, as well as multiple endogenous state variables, namely the portfolio value…
The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for pricing under credit, collateral and funding risks into term structure modelling, integrating the origination of different term structures with such effects. Under a number of ass…
There is a great number of factors to take into account when building and managing an investment portfolio. It is widely believed that a proper set-up of the portfolio combined with a good, robust management strategy is the key to successful investment. In this paper, we aim at an analysis of two aspects that may have an impact on investment performance: diversity of assets and inclusion of cash in the portfolio. We …
Current post-trade clearing systems rely almost exclusively on cash or cash-like collateral, leaving vast reserves of short-term liquidity embedded in trade credit outside formal settlement infrastructures. A key barrier to integrating this liquidity is the near-universal dependence of clearing services on novation, which imposes institutional overhead that restricts accessibility and limits the range of obligations …
This book, which is in Spanish, provides detailed descriptions, including over 550 mathematical formulas, for over 150 trading strategies across a host of asset classes (and trading styles). This includes stocks, options, fixed income, futures, ETFs, indexes, commodities, foreign exchange, convertibles, structured assets, volatility (as an asset class), real estate, distressed assets, cash, cryptocurrencies, miscella…
We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between Libor and OIS rates, the explosion of Basis Swaps spreads, and the diffusion of collateral agreements and CSA-discounting, in terms of credit and liquidity effects. We also review t…
With the recent advancements in machine learning (ML), artificial neural networks (ANN) are starting to play an increasingly important role in quantitative finance. Dynamic portfolio optimization is among many problems that have significantly benefited from a wider adoption of deep learning (DL). While most existing research has primarily focused on how DL can alleviate the curse of dimensionality when solving the Ha…
This paper proposes a Deep Reinforcement Learning algorithm for financial portfolio trading based on Deep Q-learning. The algorithm is capable of trading high-dimensional portfolios from cross-sectional datasets of any size which may include data gaps and non-unique history lengths in the assets. We sequentially set up environments by sampling one asset for each environment while rewarding investments with the result…
The financial industry has undergone a significant transition from the London Interbank Offered Rates (LIBORs) to Risk Free Rates (RFRs) such as, e.g., the Secured Overnight Financing Rate (SOFR) in the U.S. and the Cash Rate (AONIA) in Australia, as primary benchmark rates for borrowing costs. The paper examines the pricing and hedging method for financial products in a cross-currency framework with the special emph…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo haircuts. Moreover, the collateral rate term structure is not observable in the repo market, for derivatives netting sets are perpetual while repo tenors are typically in months. This arti…
We audit whether candle-based machine-learning models can turn predictions of cryptocurrency extrema or short-horizon outcomes into positive Binance Spot paper policies after assumed costs. Numerical results come from scripted fixed-seed model runs and deterministic simulators; human-supervised AI agents supported the July 20 evidence-integrity revision through literature retrieval, separately tasked critique, artifa…
Money market fund assets track the amount of cash parked in short-term low-risk vehicles, providing insight into liquidity preference, deposit substitution, and defensive positioning.
Treasury General Account tracks the U.S. Treasury’s cash balance at the Federal Reserve and influences system liquidity by absorbing or releasing reserves.
Reverse Repo Facility usage shows how much cash is being parked at the Federal Reserve overnight and helps track reserve distribution, collateral demand, and system liquidity conditions.
MBS Prepayment Speed — Refinancing and turnover driven cash-flow uncertainty in agency mortgages.
CDS Basis Trade — Arbitrage between cash bonds and CDS contracts revealing funding and counterparty frictions.
Shareholder Yield — Combined dividends and buybacks as cash return to equity holders.
Treasury Futures Basis — Cash-futures basis driven by cheapest-to-deliver dynamics.
Bill Supply Shock — Large T-bill issuance absorbing cash and lifting front-end yields.
Basis Trade Crypto (Crypto).
Crypto Basis Trade (Crypto).
Cash Market Liquidity Premium — Extra yield demanded for holding less liquid cash instruments.
Variation Margin Call — Daily mark-to-market cash calls that can drain liquidity.
Payment in Kind Toggle — Option to pay interest in kind stressing cash interest coverage.
Z Spread Measure — Constant spread over the spot curve equating price to cash flows.
Treasury Curve 1M — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 3M — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 6M — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 1Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 2Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 5Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 7Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 10Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 20Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve 30Y — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve front — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve belly — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve long-end — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve ultra-long — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve US — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve Euro Area — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve UK — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve Japan — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve China — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve EM Asia — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve LatAm — Rates and credit cash-market concept for fixed-income desks.
Treasury Curve CEEMEA — Rates and credit cash-market concept for fixed-income desks.
Basis Cash Carry BNB (Crypto).
Basis Cash Carry BTC (Crypto).
Basis Cash Carry CEX (Crypto).
Basis Cash Carry DeFi (Crypto).
Basis Cash Carry DEX (Crypto).
Basis Cash Carry ETH (Crypto).
Basis Cash Carry options (Crypto).
Basis Cash Carry perp (Crypto).
Basis Cash Carry SOL (Crypto).
Basis Cash Carry spot (Crypto).
Basis Cash Carry XRP (Crypto).
Bill Supply Shock — Large T-bill issuance absorbing cash and lifting front-end yields.
Buyback Yield banks — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield China — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield energy — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield Europe — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield growth — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield healthcare — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield Japan — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield large-cap — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield mega-cap — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield small-cap — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield tech — Equity factor, event, or flow concept for cash equity desks.
Buyback Yield value — Equity factor, event, or flow concept for cash equity desks.