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We revisit Gerber's Informational Quality (IQ) framework, a data-driven approach for constructing correlation matrices from co-movement evidence, and address two obstacles that limit its use in portfolio optimization: guaranteeing positive semidefinite ness (PSD) and controlling spectral conditioning. We introduce a squeezing identity that represents IQ estimators as a convex-like combination of structured channel ma…
Anxiety levels in the Aave community spiked in November 2022 as Avi Eisenberg performed an attack on Aave. Eisenberg attempted to short the CRV token by using funds borrowed on the protocol to artificially deflate the value of CRV. While the attack was ultimately unsuccessful, it left the Aave community scared and even raised question marks regarding the feasibility of large lending platforms under decentralized gove…
In this paper, we propose a clearing model for prices in a financial markets due to margin calls on short sold assets. In doing so, we construct an explicit formulation for the prices that would result immediately following asset purchases and a margin call. The key result of this work is the determination of a threshold short interest ratio which, if exceeded, results in the discontinuity of the clearing prices due …
We have developed a statistical technique to test the model assumption of binary regime switching extension of the geometric Brownian motion (GBM) model by proposing a new discriminating statistics. Given a time series data, we have identified an admissible class of the regime switching candidate models for the statistical inference. By performing several systematic experiments, we have successfully shown that the sa…
We develop a theoretical framework that aims to link micro-level option hedging and stock-specific factor exposure with macro-level market turbulence and explain endogenous volatility amplification during gamma-squeeze events. By explicitly modeling market-maker delta-neutral hedging and incorporating beta-dependent volatility normalization, we derive a stability condition that characterizes the onset of a gamma-sque…
Accurately forecasting daily exchange rate returns represents a longstanding challenge in international finance, as the exchange rate returns are driven by a multitude of correlated market factors and exhibit high-frequency fluctuations. This paper proposes EXFormer, a novel Transformer-based architecture specifically designed for forecasting the daily exchange rate returns. We introduce a multi-scale trend-aware sel…
Time series forecasting is important in finance domain. Financial time series (TS) patterns are influenced by both short-term public opinions and medium-/long-term policy and market trends. Hence, processing multi-period inputs becomes crucial for accurate financial time series forecasting (TSF). However, current TSF models either use only single-period input, or lack customized designs for addressing multi-period ch…
Stock price prediction is influenced by a variety of factors, including technical indicators, which makes Feature selection crucial for identifying the most relevant predictors. This study examines the impact of feature selection on stock price prediction accuracy using technical indicators. A total of 123 technical indicators and 10 regression models were evaluated using 13 years of Apple Inc. data. The primary goal…
The short squeeze of Gamestop (GME) has revealed to the world how retail investors pooling through social media can severely impact financial markets. In this paper, we devise an early warning signal to detect suspicious users' social network activity, which might affect the financial market stability. We apply our approach to the subreddit r/WallStreetBets, selecting two meme stocks (GME and AMC) and two non-meme st…
This discussion applies quantitative finance methods and economic arguments to cryptocurrencies in general and bitcoin in particular -- as there are about $10,000$ cryptocurrencies, we focus (unless otherwise specified) on the most discussed crypto of those that claim to hew to the original protocol (Nakamoto 2009) and the one with, by far, the largest market capitalization. In its current version, in spite of the hy…
This study examined the endogenous nature of negative bubbles forming in meme stocks with the Log-Periodic Power Law (LPPL) Confidence Indicator (CI). A meme stock is a stock that has gained a significant amount of attention on a large social media platform such as Yahoo! or Reddit. This study examined four meme stocks including Tesla, Inc. (TSLA), GameStop Corp. (GME), Koss Corporation (KOSS), and AMC Entertainment …
The `Black Thursday' crisis in cryptocurrency markets demonstrated deleveraging risks in over-collateralized non-custodial stablecoins. We develop a stochastic model that helps explain deleveraging crises in these over-collateralized systems. In our model, the stablecoin supply is decided by speculators who optimize the profitability of a leveraged position while incorporating the forward-looking cost of collateral l…
The main purpose of this study is to introduce a semi-classical model describing betting scenarios in which, at variance with conventional approaches, the payoff of the gambler is encoded into the internal degrees of freedom of a quantum memory element. In our scheme, we assume that the invested capital is explicitly associated with the quantum analog of the free-energy (i.e. ergotropy functional by Allahverdyan, Bal…
In this paper, we examine higher order difference problems. Using the "squeezing" argument, we derive both Euler's condition and the transversality condition. In order to derive the two conditions, two needed assumptions are identified. A counterexample, in which the transversality condition is not satisfied without the two assumptions, is also presented.
To fade the move is to take the other side of a fast print — sell a spike, buy a dump — on the view that it is flow or a squeeze, not a new equilibrium.
A gamma squeeze is a price spiral where dealer hedging of short call (or put) gamma forces them to buy rallies and sell dips, amplifying the move that created the gamma.
Short covering is buying to close a short — a rally driven by the short base shrinking, not by new longs arriving with a fundamental bid.
Dutch disease is the squeeze on tradable non-resource sectors when a resource boom or capital inflow appreciates the real exchange rate and pulls factors into the booming sector.
Evergrande’s 2021 missed payments opened a still-running Chinese property and LGFV credit squeeze — a developer-leverage and pre-sale trust crisis under a political deleveraging campaign.
The Plaza Accord was a coordinated 1985 G5 intervention to weaken the dollar after a brutal early-1980s USD squeeze — not a crash, but a regime change in FX that re-priced US manufacturing and later fed Japan’s bubble politics.
Securities Lending Fee — Cost to borrow stock for shorting — spikes signal specialness and squeeze risk.
Short Interest Ratio — Crowded short positioning that can fuel squeezes or confirm bearish consensus.
Long the convertible and short the delta in the stock — harvest cheap implied vol / credit, with funding and squeeze risk.
Long the convertible and short the delta in the stock — harvest cheap implied vol / credit, with funding and squeeze risk.
Dutch disease is the squeeze on tradable non-resource sectors when a resource boom or capital inflow appreciates the real exchange rate and pulls factors into the booming sector.
Evergrande’s 2021 missed payments opened a still-running Chinese property and LGFV credit squeeze — a developer-leverage and pre-sale trust crisis under a political deleveraging campaign.
To fade the move is to take the other side of a fast print — sell a spike, buy a dump — on the view that it is flow or a squeeze, not a new equilibrium.
A gamma squeeze is a price spiral where dealer hedging of short call (or put) gamma forces them to buy rallies and sell dips, amplifying the move that created the gamma.
The Plaza Accord was a coordinated 1985 G5 intervention to weaken the dollar after a brutal early-1980s USD squeeze — not a crash, but a regime change in FX that re-priced US manufacturing and later fed Japan’s bubble politics.
Securities Lending Fee — Cost to borrow stock for shorting — spikes signal specialness and squeeze risk.
Short Interest Ratio — Crowded short positioning that can fuel squeezes or confirm bearish consensus.