arXiv · arXiv q-fin · 2025
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…
Pankaj K Agarwal, H K Pradhan, Konark Saxena
arXiv · arXiv q-fin · 2020
We coin the term *Protocols for Loanable Funds (PLFs)* to refer to protocols which establish distributed ledger-based markets for loanable funds. PLFs are emerging as one of the main applications within Decentralized Finance (DeFi), and use smart contract code to facilitate the intermediation of loanable funds. In doing so, these protocols allow agents to borrow and save programmatically. Within these protocols, inte…
Lewis Gudgeon, Sam M. Werner, Daniel Perez, William J. Knottenbelt
arXiv · arXiv q-fin · 2025
In this work we propose a framework to construct Market-Implied Sustainability (MIS) scores for individual firms by exploiting fund-level sustainability classifications and granular portfolio holdings. The central idea is that the relative over/under-representation of a stock in sustainability-oriented funds reveals a market-based assessment of its sustainability profile. We implement the methodology in the European …
Rosella Giacometti, Gabriele Torri, Marco Bonomelli, Davide Lauria
arXiv · arXiv q-fin · 2022
We use the Grossman \& Stiglitz (1980) framework to build a reference portfolio for uninformed investors and employ this portfolio to assess the performance of actively managed equity mutual funds. We propose an empirical methodology to construct this reference portfolio using the information on prices and supply. We show that mutual funds provide, on average, an insignificant alpha of 23 basis points per year when c…
Radu Burlacu, Patrice Fontaine, Sonia Jimenez-Garcès
arXiv · arXiv · 2024
The domain of hedge fund investments is undergoing significant transformation, influenced by the rapid expansion of data availability and the advancement of analytical technologies. This study explores the enhancement of hedge fund investment performance through the integration of machine learning techniques, the application of PolyModel feature selection, and the analysis of fund size. We address three critical ques…
Siqiao Zhao, Dan Wang, Raphael Douady
arXiv · arXiv · 2022
We develop a comprehensive framework to measure the impact of the climate transition on investment portfolios. Our analysis is enriched by including geographical, sectoral, company and ISIN-level data to assess transition risk. We find that investment funds suffer a moderate 5.7% loss upon materialization of a high transition risk scenario. However, the risk distribution is significantly left-skewed, with the worst 1…
Ricardo Crisostomo
arXiv · arXiv · 2021
The Secured Overnight Funding Rate (SOFR) is becoming the main Risk-Free Rate benchmark in US dollars, thus interest rate term structure models need to be updated to reflect the key features exhibited by the dynamics of SOFR and the forward rates implied by SOFR futures. Historically, interest rate term structure modelling has been based on rates of substantially longer time to maturity than overnight, but with SOFR …
Karol Gellert, Erik Schlögl
arXiv · arXiv · 2016
In the last years, increasing efforts have been put into the development of effective stress tests to quantify the resilience of financial institutions. Here we propose a stress test methodology for central counterparties based on a network characterization of clearing members, whose links correspond to direct credits and debits. This network constitutes the ground for the propagation of financial distress: equity lo…
Giulia Poce, Giulio Cimini, Andrea Gabrielli, Andrea Zaccaria, Giuditta Baldacci
arXiv · arXiv · 2011
Using a recently introduced method to quantify the time varying lead-lag dependencies between pairs of economic time series (the thermal optimal path method), we test two fundamental tenets of the theory of fixed income: (i) the stock market variations and the yield changes should be anti-correlated; (ii) the change in central bank rates, as a proxy of the monetary policy of the central bank, should be a predictor of…
Kun Guo, Wei-Xing Zhou, Si-Wei Cheng, Didier Sornette
arXiv · arXiv · 2010
The proprietary nature of Hedge Fund investing means that it is common practise for managers to release minimal information about their returns. The construction of a Fund of Hedge Funds portfolio requires a correlation matrix which often has to be estimated using a relatively small sample of monthly returns data which induces noise. In this paper random matrix theory (RMT) is applied to a cross-correlation matrix C,…
Thomas Conlon, Heather J. Ruskin, Martin Crane
arXiv · arXiv q-fin · 2012
A fund manager invests both the fund's assets and own private wealth in separate but potentially correlated risky assets, aiming to maximize expected utility from private wealth in the long run. If relative risk aversion and investment opportunities are constant, we find that the fund's portfolio depends only on the fund's investment opportunities, and the private portfolio only on private opportunities. This conclus…
Paolo Guasoni, Gu Wang
arXiv · arXiv · 2025
The Federal Open Market Committee (FOMC) sets the federal funds rate, shaping monetary policy and the broader economy. We introduce \emph{FedSight AI}, a multi-agent framework that uses large language models (LLMs) to simulate FOMC deliberations and predict policy outcomes. Member agents analyze structured indicators and unstructured inputs such as the Beige Book, debate options, and vote, replicating committee reaso…
Yuhan Hou, Tianji Rao, Jeremy Tan, Adler Viton, Xiyue Zhang
arXiv · arXiv · 2025
This review paper explores the evolution and implementation of target-date funds (TDFs), specifically focusing on their application within the context of Chile's 2025 pension reform. The introduction of TDFs marks a significant shift in Chile's pension system, which has traditionally relied on a multifund structure (essentially a target-risk funds system). We offer a comprehensive review of the theoretical foundation…
Fernando Suárez, José Manuel Peña, Omar Larré
arXiv · arXiv · 2022
The paper intends to perform a relevant study on the closed-end fund puzzle in the perspective of an emerging market. Quarterly data of 36 closed-end mutual funds traded in Dhaka Stock Exchange are collected over the sample period of 2016 to 2019. Dependent and independent variables are mapped down by exploring previous researches. Weight of top 10 investments, fund size, fund age, fund maturity, turnover and dividen…
Farhana Rahman
arXiv · arXiv · 2022
Predicting fund performance is beneficial to both investors and fund managers, and yet is a challenging task. In this paper, we have tested whether deep learning models can predict fund performance more accurately than traditional statistical techniques. Fund performance is typically evaluated by the Sharpe ratio, which represents the risk-adjusted performance to ensure meaningful comparability across funds. We calcu…
Nghia Chu, Binh Dao, Nga Pham, Huy Nguyen, Hien Tran
arXiv · arXiv · 2022
The generic case of pensions fund that it is not sufficiently auto financed and it is thoroughly maintained with an external financing effort is considered in this chapter. To represent the unrestricted reserves value process of this kind of funds, a time homogeneous diffusion stochastic process with finite expected time to ruin is proposed. Then it is projected a financial tool that regenerates the diffusion at some…
Manuel Alberto M. Ferreira
arXiv · arXiv · 2021
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a performance criterion based on the lower mean square error between the investor's wealth and a predetermined target wealth level. Since the target level is defined by a deterministic fu…
Masashi Ieda
arXiv · arXiv · 2015
The model of this paper gives a convenient strategy that a bank in the federal funds market can use in order to maximize its profit in a contemporaneous reserve requirement (CRR) regime. The reserve requirements are determined by the demand deposit process, modelled as a Brownian motion with drift. We propose a new model in which the cumulative funds purchases and sales are discounted at possible different rates. We …
Traian A. Pirvu, Elena Cristina Canepa