arXiv · arXiv q-fin · 2021
Stock market returns are typically analyzed using standard regression, yet they reside on irregular domains which is a natural scenario for graph signal processing. To this end, we consider a market graph as an intuitive way to represent the relationships between financial assets. Traditional methods for estimating asset-return covariance operate under the assumption of statistical time-invariance, and are thus unabl…
Alvaro Arroyo, Bruno Scalzo, Ljubisa Stankovic, Danilo P. Mandic
arXiv · arXiv q-fin · 2019
Investment returns naturally reside on irregular domains, however, standard multivariate portfolio optimization methods are agnostic to data structure. To this end, we investigate ways for domain knowledge to be conveniently incorporated into the analysis, by means of graphs. Next, to relax the assumption of the completeness of graph topology and to equip the graph model with practically relevant physical intuition, …
Bruno Scalzo Dees, Ljubisa Stankovic, Anthony G. Constantinides, Danilo P. Mandic
arXiv · arXiv · 2016
A repurchase agreement lets investors borrow cash to buy securities. Financier only lends to securities' market value after a haircut and charges interest. Repo pricing is characterized with its puzzling dual pricing measures: repo haircut and repo spread. This article develops a repo haircut model by designing haircuts to achieve high credit criteria, and identifies economic capital for repo's default risk as the ma…
Wujiang Lou
arXiv · arXiv q-fin · 2026
Automated market maker (AMM) fee rules are often evaluated by liquidity-provider (LP) welfare, but that objective mixes fee revenue, adverse-selection loss (loss-versus-rebalancing, LVR), routing response, and liquidity supply. Fixed-fee Uniswap v3 history cannot separate these channels or identify counterfactual trader-facing dynamic-fee rules. Real fee-related variation nonetheless exists: the Uniswap protocol-fee …
Wen-Ting Wang
arXiv · arXiv q-fin · 2017
In this paper, we propose a novel investment strategy for portfolio optimization problems. The proposed strategy maximizes the expected portfolio value bounded within a targeted range, composed of a conservative lower target representing a need for capital protection and a desired upper target representing an investment goal. This strategy favorably shapes the entire probability distribution of returns, as it simulta…
Rongju Zhang, Nicolas Langrené, Yu Tian, Zili Zhu, Fima Klebaner
arXiv · arXiv q-fin · 2014
Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this linear problem has a very large number of linear constraints, too many to be enforced in practice. In the literature this is addressed by a reformulation of the problem using so-called …
Georg Hofmann
arXiv · arXiv · 2025
Large language models (LLMs) produce fluent but unsupported answers - hallucinations - limiting safe deployment in high-stakes domains. We propose ECLIPSE, a framework that treats hallucination as a mismatch between a model's semantic entropy and the capacity of available evidence. We combine entropy estimation via multi-sample clustering with a novel perplexity decomposition that measures how models use retrieved ev…
Mainak Singha
arXiv · arXiv · 2017
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…
Wujiang Lou
arXiv · arXiv · 2017
Haircutting non-cash collateral has become a key element of the post-crisis reform of the shadow banking system and OTC derivatives markets. This article develops a parametric haircut model by expanding haircut definitions beyond the traditional value-at-risk measure and employing a double-exponential jump-diffusion model for collateral market risk. Haircuts are solved to target credit risk measurements, including pr…
Wujiang Lou
arXiv · arXiv · 2026
Financial decision systems require fast surrogate models for pricing, calibration, hedging, XVA, stress testing, and portfolio optimization. Standard neural surrogates reproduce prices or risk quantities, but downstream tasks depend as much on derivatives: deltas, vegas, curve and credit-spread sensitivities, exposure and objective gradients. We formulate a derivative-informed operator-learning framework in which the…
Miquel Noguer I Alonso
arXiv · arXiv q-fin · 2021
AMMs are autonomous smart contracts deployed on a blockchain that make markets between different assets that live on that chain. In this paper we are examining a specific class of AMMs called Constant Function Market Makers whose trading profile, ignoring fees, is determined by their bonding curve. This class of AMM suffers from what is commonly referred to as Impermanent Loss, which we have previously identified as …
Stefan Loesch, Nate Hindman, Mark B Richardson, Nicholas Welch
arXiv · arXiv q-fin · 2015
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical studies suggest that large price jumps cannot be explained by news and are the result of endogenous feedback loops. Although plausible, a clear-cut empirical evidence for such a s…
Jonathan Donier, Jean-Philippe Bouchaud
arXiv · arXiv q-fin · 2025
We introduce a modular framework that extends the signature method to handle American option pricing under evolving volatility roughness. Building on the signature-pricing framework of Bayer et al. (2025), we add three practical innovations. First, we train a gradient-boosted ensemble to estimate the time-varying Hurst parameter H(t) from rolling windows of recent volatility data. Second, we feed these forecasts into…
Roshan Shah
arXiv · arXiv q-fin · 2025
In a rapidly evolving landscape marked by continuous change and complex challenges, effective cash management stands as a cornerstone for ensuring business sustainability and driving performance. To address these pressing demands, cash managersare increasingly turning to innovative financing solutions such as venture capital, green finance, crowdfunding, advanced services from Pan-African banks, and blockchain techno…
Nohayla Badrane, Zineb Bamousse
arXiv · arXiv q-fin · 2023
Risk budgeting is a portfolio strategy where each asset contributes a prespecified amount to the aggregate risk of the portfolio. In this work, we propose an efficient numerical framework that uses only simulations of returns for estimating risk budgeting portfolios. Besides a general cutting planes algorithm for determining the weights of risk budgeting portfolios for arbitrary coherent distortion risk measures, we …
Bernardo Freitas Paulo da Costa, Silvana M. Pesenti, Rodrigo S. Targino