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Traditional risk-adjusted returns, such as the Treynor, Sharpe, Sortino, and Information ratios, have been pivotal in portfolio asset allocation, focusing on minimizing risk while maximizing profit. Nevertheless, these metrics often fail to account for the distinct characteristics of bull and bear markets, leading to sub-optimal investment decisions. This paper introduces a novel approach called the Market-adaptive R…
This paper studies a type of periodic utility maximization problem for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio of two adjacent wealth levels over an infinite horizon, featuring the dynamic adjustments in portfolio decision according to past achievements. Under power utility, we transform the …
On a daily investment decision in a security market, the price earnings (PE) ratio is one of the most widely applied methods being used as a firm valuation tool by investment experts. Unfortunately, recent academic developments in financial econometrics and machine learning rarely look at this tool. In practice, fundamental PE ratios are often estimated only by subjective expert opinions. The purpose of this research…
ABSTRACT Most structural models of default preclude the firm from altering its capital structure. In practice, firms adjust outstanding debt levels in response to changes in firm value, thus generating mean‐reverting leverage ratios. We propose a structural model of default with stochastic interest rates that captures this mean reversion. Our model generates credit spreads that are larger for low‐leverage firms, and …
This paper compares different methods for forecasting the term structure of U.S. and European zero-coupon government bonds using both traditional econometric and Machine Learning (ML) approaches. We compare classical models (e.g., Dynamic Nelson-Siegel (DNS) and Principal Component Analysis (PCA)) with different Neural Network (NN) architectures, including those inspired by the classical models, on the U.S. Treasury …
Hit ratio is a common service metric for electronic corporate bond market making, but raw hit-ratio targets can be economically misleading when client flow has heterogeneous adverse-selection content. This paper extends a stochastic-control framework for OTC bond RFQ market making with hit-ratio constraints by replacing raw hit ratio with a residual-quality-adjusted hit ratio. The key modelling distinction is that ad…
Concentrated liquidity automated market makers (AMMs), such as Uniswap v3, enable liquidity providers (LPs) to earn liquidity rewards by depositing tokens into liquidity pools. However, LPs often face significant financial losses driven by poorly selected liquidity provision intervals and high costs associated with frequent liquidity reallocation. To support LPs in achieving more profitable liquidity concentration, w…
Liquidity providers (LPs) on decentralized exchanges (DEXs) can protect themselves from adverse selection risk by updating their positions more frequently. However, repositioning is costly, because LPs have to pay gas fees for each update. We analyze the causal relation between repositioning and liquidity concentration around the market price, using the entry of blockchain scaling solutions, Arbitrum and Polygon, as …
We present a version of the fundamental theorem of asset pricing (FTAP) for continuous time large financial markets with two filtrations in an $L^p$-setting for $ 1 \leq p < \infty$. This extends the results of Yuri Kabanov and Christophe Stricker \cite{KS:06} to continuous time and to a large financial market setting, however, still preserving the simplicity of the discrete time setting. On the other hand it general…
Expanding on techniques of concentration of measure, we develop a quantitative framework for modeling liquidity risk using convex risk measures. The fundamental objects of study are curves of the form $(ρ(λX))_{λ\ge 0}$, where $ρ$ is a convex risk measure and $X$ a random variable, and we call such a curve a \emph{liquidity risk profile}. The shape of a liquidity risk profile is intimately linked with the tail behavi…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We essentially show how to use structural models with a calibration capability that is typical of the much more tractable credit-spread based intensity models. We apply the structural …
In this work we develop a tractable structural model with analytical default probabilities depending on a random default barrier and possibly random volatility ideally associated with a scenario based underlying firm debt. We show how to calibrate this model using a chosen number of reference Credit Default Swap (CDS) market quotes. In general this model can be seen as a possible extension of the time-varying AT1P mo…
We build on the work in Fackler and King 1990, and propose a more general calibration model for implied risk neutral densities. Our model allows for the joint calibration of a set of densities at different maturities and dates through a Bayesian dynamic Beta Markov Random Field. Our approach allows for possible time dependence between densities with the same maturity, and for dependence across maturities at the same …
We perform an extensive and robust study of the performance of three different pairs trading strategies—the distance, cointegration and copula methods—on the entire US equity market from 1962 to 2014 with time-varying trading costs. For the cointegration and copula methods, we design a computationally efficient two-step pairs trading strategy. In terms of economic outcomes, the distance, cointegration and copula meth…
The integration of thematic satellite allocations into core-satellite portfolio architectures is commonly approached using factor exposures, discretionary convictions, or backtested performance, with feasibility assessed primarily through liquidity screens or market-impact considerations. While such approaches may be appropriate at institutional scale, they are ill-suited to small portfolios and robustness-oriented a…
This paper maps the emerging market for decentralized credit in which ERC 4626 vaults and third-party curators, rather than monolithic lending protocols alone, increasingly determine underwriting and leverage decisions. We show that modular vaults differ in capital utilization, cross-chain and cross asset concentration, and liquidity risk structure. Further, we show that a small set of curators intermediates a dispro…
We consider state of the art applications of artificial intelligence (AI) in modelling human financial expectations and explore the potential of quantum logic to drive future advancements in this field. This analysis highlights the application of machine learning techniques, including reinforcement learning and deep neural networks, in financial statement analysis, algorithmic trading, portfolio management, and robo-…
This paper presents a new approach to volume ratio prediction in financial markets, specifically targeting the execution of Volume-Weighted Average Price (VWAP) strategies. Recognizing the importance of accurate volume profile forecasting, our research leverages the Transformer architecture to predict intraday volume ratio at a one-minute scale. We diverge from prior models that use log-transformed volume or turnover…
An agent workflow is a structured loop that plans, calls tools or models, observes results, and repeats until a stop condition — a pipeline with memory, contracts, and failure handling rather than a single completion.
Hallucination is fluent generation that is not supported by the source or the world — a likelihood-trained model completing a pattern, not a database lookup.
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.
RAG retrieves relevant documents first, then conditions a language model on that evidence so answers can be grounded, cited, and updated without retraining.
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
Leverage Ratio Constraint — Non-risk-weighted capital floor binding balance-sheet capacity.
Liquidity Coverage Ratio — Regulatory high-quality liquid asset requirement for 30-day stress.
Net Stable Funding Ratio — Stable funding versus long-term assets — constrains maturity transformation.
A debt covenant is a contractual limit on the borrower — maintain a ratio, not do a thing, or report a thing — that turns a miss into a default or a fee.
Interest coverage is EBIT (or EBITDA) divided by interest expense — how many times operating profit can pay the coupon bill.
Refinery margin: long gasoline and distillate, short crude, in a stated ratio — energy RV rather than a WTI call.
Which expiry you hold and when you roll is a first-class P&L — not an operations footnote — especially in commodities and VIX.
Client money in a futures account the CTA trades by POA — transparency, better liquidation, and operational work versus a commingled fund.
TU through ultra-long bond futures, bunds, gilts, JGBs — duration trend, the sleeve that made 2022 a CTA year.
Steepeners, flatteners, and butterflies on the bond/STIR strip — duration-neutral-ish curve trades as a CTA RV sleeve.
Delta is the first derivative of option value to the underlying — the hedge ratio and a moneyness label.
Gamma is the sensitivity of delta to the underlying — how fast the hedge ratio moves, and who is chasing whom.
A bear steepener is a curve move where long yields rise more than front yields (or fronts fall less) as the market prices more term premium, more deficit, or less faith in long-run restraint — and duration loses.
CS01 is the dollar value of one basis point of credit spread — how much the book makes or loses if the name or index OAS/CDS widens by 1 bp.
DV01 is the dollar value of one basis point: how much the position’s mark changes if the yield (or the curve point you risk on) moves by 0.01%.
The current ratio is current assets divided by current liabilities — a coarse solvency-within-a-year screen.
Debt-to-equity is interest-bearing debt divided by book (or market) equity — a headline leverage ratio that hides maturity and covenants.
Free cash flow is cash from operations minus the capex needed to keep and grow the business — cash that could leave the firm.
A growth stock is priced for high expected earnings or sales growth — a duration asset dressed as an equity.
The PEG ratio is P/E divided by expected earnings growth — a back-of-the-envelope adjustment of the multiple for growth.
Price-to-book is market cap divided by book equity — what the market pays per unit of accounting residual.
The P/E ratio is price per share divided by earnings per share — how many years of current earnings the market is paying for.
The quick ratio is cash, marketable securities, and receivables over current liabilities — current ratio without inventory.
A spin-off distributes a subsidiary to existing shareholders as a new listed firm — a separation of claims, not a sale.
The Panic of 1792 was the first US securities-market crash, after a leveraged attempt to corner federal debt, and the first Treasury-led lender-of-last-resort operation under Hamilton.
March 2023’s US regional-bank crisis (SVB, Signature, First Republic) was a social-media deposit run on duration-mismatched, uninsured-deposit franchises — 1980s S&L math plus a Twitter fuse.
The 2013 taper tantrum was a fast global rates-and-EM selloff after Bernanke hinted at slowing QE — a rehearsal of how the world’s dollar duration is one speech.
September 2022’s UK gilt crash was a liability-driven-investment margin spiral: leveraged duration in pension LDI funds met a fiscal shock and forced gilt sales until the BoE bought the market.
Distressed Debt Ratio — Share of debt trading at deep discounts — early warning for credit cycle turns.
Duration Risk — Interest-rate sensitivity of bond portfolios, amplified in low-yield high-duration regimes.
Key Rate Duration — Bucketed rate sensitivity across curve points for relative-value and hedge construction.
Bank Capital Ratio — Loss-absorbing equity buffer determining lending capacity and dividend policy.
A bear steepener is a curve move where long yields rise more than front yields (or fronts fall less) as the market prices more term premium, more deficit, or less faith in long-run restraint — and duration loses.
Beta is the regression slope of an asset’s return on a factor (usually the market) — a hedge ratio, not a destiny.
Cointegration Pairs Trading — Mean-reversion on stationary spreads between related instruments.
Refinery margin: long gasoline and distillate, short crude, in a stated ratio — energy RV rather than a WTI call.
Which expiry you hold and when you roll is a first-class P&L — not an operations footnote — especially in commodities and VIX.
Client money in a futures account the CTA trades by POA — transparency, better liquidation, and operational work versus a commingled fund.
The current ratio is current assets divided by current liabilities — a coarse solvency-within-a-year screen.
A debt covenant is a contractual limit on the borrower — maintain a ratio, not do a thing, or report a thing — that turns a miss into a default or a fee.
Debt-to-equity is interest-bearing debt divided by book (or market) equity — a headline leverage ratio that hides maturity and covenants.
Delta is the first derivative of option value to the underlying — the hedge ratio and a moneyness label.
Distressed Debt Ratio — Share of debt trading at deep discounts — early warning for credit cycle turns.
Duration Risk — Interest-rate sensitivity of bond portfolios, amplified in low-yield high-duration regimes.
The ECB balance sheet reflects the scale of European Central Bank asset holdings and helps track euro-area liquidity, policy transmission, and duration absorption.
The expense ratio is annual fund costs as a percent of AUM — the fee drag you pay whether the manager is right or not.
TU through ultra-long bond futures, bunds, gilts, JGBs — duration trend, the sleeve that made 2022 a CTA year.
Free cash flow is cash from operations minus the capex needed to keep and grow the business — cash that could leave the firm.
Gamma is the sensitivity of delta to the underlying — how fast the hedge ratio moves, and who is chasing whom.
A growth stock is priced for high expected earnings or sales growth — a duration asset dressed as an equity.
Hallucination is fluent generation that is not supported by the source or the world — a likelihood-trained model completing a pattern, not a database lookup.
The information ratio is active return over active risk — residual performance per unit of tracking error versus a benchmark.
Interest coverage is EBIT (or EBITDA) divided by interest expense — how many times operating profit can pay the coupon bill.
Steepeners, flatteners, and butterflies on the bond/STIR strip — duration-neutral-ish curve trades as a CTA RV sleeve.
Key Rate Duration — Bucketed rate sensitivity across curve points for relative-value and hedge construction.