arXiv · arXiv q-fin · 2025
Islamic equity screening relies on multiple binary rulebooks that often classify the same firm differently. This paper develops a Continuous Shariah Compliance Index (CSCI) on $[0,1]$ that embeds the published business-activity and financial-ratio thresholds of six leading standards in a single transparent measure. Using CRSP/Compustat U.S. equities from 1999-2024 with lagged accounting inputs and monthly portfolio f…
Abdulrahman Qadi, Akash Sharma, Francesca Medda
arXiv · arXiv q-fin · 2025
This article examines the evolving landscape of artificial intelligence (AI) regulation in financial services, detailing the legal frameworks and compliance challenges posed by rapid technological adoption. By reviewing current legislation, industry guidelines, and real-world use cases, it highlights how AI-driven processes, from fraud detection to algorithmic trading, offer efficiency gains yet introduce significant…
Shahmar Mirishli
arXiv · arXiv q-fin · 2025
A Bayesian analytics framework that precisely quantifies uncertainty offers a significant advance for financial risk management. We develop an integrated approach that consistently enhances the handling of risk in market volatility forecasting, fraud detection, and compliance monitoring. Our probabilistic, interpretable models deliver reliable results: We evaluate the performance of one-day-ahead 95% Value-at-Risk (V…
Sharif Al Mamun, Rakib Hossain, Md. Jobayer Rahman, Malay Kumar Devnath, Farhana Afroz
arXiv · arXiv q-fin · 2025
RegTech is a rapidly rising financial services sector focused on using cutting-edge technology to improve the process of regulatory compliance. RegTech solutions are characterized by numerous features and benefits that can considerably contribute to helping organizations operate effectively in the increasingly regulated environment, when it comes to compliance and risk management. This paper sheds light on why RegTec…
Chintamani Bagwe
arXiv · arXiv q-fin · 2025
We develop a rigorous walk-forward validation framework for algorithmic trading designed to mitigate overfitting and lookahead bias. Our methodology combines interpretable hypothesis-driven signal generation with reinforcement learning and strict out-of-sample testing. The framework enforces strict information set discipline, employs rolling window validation across 34 independent test periods, maintains complete int…
Gagan Deep, Akash Deep, William Lamptey
arXiv · arXiv q-fin · 2025
The tokenization of real-world assets (RWAs) promises to transform financial markets by enabling fractional ownership, global accessibility, and programmable settlement of traditionally illiquid assets such as real estate, private credit, and government bonds. While technical progress has been rapid, with over \$25 billion in tokenized RWAs brought on-chain as of 2025, liquidity remains a critical bottleneck. This pa…
Rischan Mafrur
arXiv · arXiv q-fin · 2024
Mid-cap companies, generally valued between \$2 billion and \$10 billion, provide investors with a well-rounded opportunity between the fluctuation of small-cap stocks and the stability of large-cap stocks. This research builds upon the long-short equity approach (e.g., Michaud, 2018; Dimitriu, Alexander, 2002) customized for mid-cap equities, providing steady risk-adjusted returns yielding a significant Sharpe ratio…
Saumya Kothari, Harsh Shah, Utkarsh Prajapati, Shrinjay Kaushik
arXiv · arXiv q-fin · 2025
This research presents a framework for quantitative risk management in volatile markets, specifically focusing on expectile-based methodologies applied to the FTSE 100 index. Traditional risk measures such as Value-at-Risk (VaR) have demonstrated significant limitations during periods of market stress, as evidenced during the 2008 financial crisis and subsequent volatile periods. This study develops an advanced expec…
Abiodun Finbarrs Oketunji
arXiv · arXiv q-fin · 2026
We develop a dynamic stochastic model of markets with an externality and multiple trading frictions, and cap-and-trade as the leading application. Slow participation, limited intermediation, and heterogeneous information interact in equilibrium: agents choose costly market access, access determines residual compliance demand, intermediary constraints translate residual demand into a surrender-month premium, and the p…
Nicola Borri, Yukun Liu, Aleh Tsyvinski, Xi Wu
arXiv · arXiv q-fin · 2025
We investigate portfolio optimization in financial markets from a trading and risk management perspective. We term this task Risk-Aware Trading Portfolio Optimization (RATPO), formulate the corresponding optimization problem, and propose an efficient Risk-Aware Trading Swarm (RATS) algorithm to solve it. The key elements of RATPO are a generic initial portfolio P, a specific set of Unique Eligible Instruments (UEIs),…
Marco Bianchetti, Gabriele D'Acunto, Gianmarco De Francisci Morales, Yuko Kuroki, Marco Scaringi
arXiv · arXiv q-fin · 2025
Large Language Models (LLMs) exhibit remarkable capabilities across a spectrum of tasks in financial services, including report generation, chatbots, sentiment analysis, regulatory compliance, investment advisory, financial knowledge retrieval, and summarization. However, their intrinsic complexity and lack of transparency pose significant challenges, especially in the highly regulated financial sector, where interpr…
Hariom Tatsat, Ariye Shater
arXiv · arXiv q-fin · 2024
The European Union Emission Trading System is a prominent market-based mechanism to reduce emissions. While the theory is well understood, we are the first to study the whole cap-and-trade mechanism as a financial market. Analyzing the universe of transactions in 2005-2020 (more than one million records of granular transaction data), we show that this market features significant inefficiencies undermining its goals. …
Nicola Borri, Yukun Liu, Aleh Tsyvinski, Xi Wu
arXiv · arXiv q-fin · 2024
The evolution of cryptocurrency and decentralized finance (DeFi) marks a significant shift in the financial landscape, making it more accessible, inclusive, and participative for various societal groups. However, this transition from traditional financial institutions to DeFi demands a meticulous policy framework that strikes a balance between innovation and safeguarding consumer interests, security, and regulatory c…
Amrutha Muralidhar, Muralidhar Lakkanna
arXiv · arXiv q-fin · 2023
Decentralized finance, powered by blockchain technology, is growing day by day. This field, which emerged a few years ago, today manages $70 billion in assets. In this study, the concept of decentralized finance is discussed and explained the differences from traditional finance. Then, compliance with the legal regulations and the requirements to ensure compliance are mentioned. An evaluation has been made about the …
Mansur Bestas
arXiv · arXiv q-fin · 2023
Financial experts and analysts seek to predict the variability of financial markets. In particular, the correct prediction of this variability ensures investors successful investments. However, there has been a big trend in finance in the last years, which are the ESG criteria. Concretely, ESG (Economic, Social and Governance) criteria have become more significant in finance due to the growing importance of investmen…
Eduardo C. Garrido-Merchán, Gabriel González Piris, Maria Coronado Vaca
arXiv · arXiv q-fin · 2020
Solar Renewable Energy Certificate (SREC) markets are a market-based system that incentivizes solar energy generation. A regulatory body imposes a lower bound on the amount of energy each regulated firm must generate via solar means, providing them with a tradeable certificate for each MWh generated. Firms seek to navigate the market optimally by modulating their SREC generation and trading rates. As such, the SREC m…
Arvind Shrivats, Dena Firoozi, Sebastian Jaimungal
arXiv · arXiv q-fin · 2020
We introduce a model for the evolution of emissions and the price of emissions allowances in a carbon market such as the European Union Emissions Trading System (EU ETS). The model accounts for multiple trading periods, or phases, with multiple times at which compliance can occur. At the end of each trading period, the participating firms must surrender allowances for their emissions made during that period, and addi…
Chassagneux Jean-Francois, Chotai Hinesh, Crisan Dan
arXiv · arXiv q-fin · 2019
Financial exchange operators cater to the needs of their users while simultaneously ensuring compliance with the financial regulations. In this work, we focus on the operators' commitment for fair treatment of all competing participants. We first discuss unbounded temporal fairness and then investigate its implementation and infrastructure requirements for exchanges. We find that these requirements can be fully met o…
Vasilios Mavroudis