We gratefully acknowledge support from
the Simons Foundation
and member institutions

Quantitative Finance

New submissions

[ total of 7 entries: 1-7 ]
[ showing up to 2000 entries per page: fewer | more ]

New submissions for Thu, 23 Nov 17

[1]  arXiv:1711.08043 [pdf, ps, other]
Title: Polynomial Jump-Diffusion Models
Subjects: Mathematical Finance (q-fin.MF); Pricing of Securities (q-fin.PR)

We develop a comprehensive mathematical framework for polynomial jump-diffusions, which nest affine jump-diffusions and have broad applications in finance. We show that the polynomial property is preserved under exponentiation and subordination. We present a generic method for option pricing based on moment expansions. As an application, we introduce a large class of novel financial asset pricing models that are based on polynomial jump-diffusions.

[2]  arXiv:1711.08245 [pdf, other]
Title: A New Interpretation of the Economic Complexity Index
Subjects: Economics (q-fin.EC)

The Economic Complexity Index (ECI) introduced by Hidalgo and Hausmann (2009) has been successful in explaining differences in GDP/capita and economic growth across countries. There has been confusion, however, about what it means and why it works. The ECI was originally motivated as an enhancement of diversity which is defined as the number of products a country is competitive in. However, the ECI is orthogonal to diversity. Nor is the ECI an eigenvalue centrality measure - in fact, the standard eigenvalue centrality measure applied to the export similarity matrix is equivalent to diversity. Instead we show that the ECI can be understood in terms of spectral clustering. It corresponds to an approximate solution to the problem of partitioning a graph into two parts in order to minimize the connections between the parts. It can also be viewed as an optimal one-dimensional ordering that clusters countries with similar exports together and minimizes the distance between countries. We present two empirical examples that involve regional employment in occupations and industries rather than exports, in which diversity fails to be a distinguishing feature of the data. These particular regional settings illustrate how the ECI can be useful even when diversity is not.

[3]  arXiv:1711.08282 [pdf, other]
Title: Asymmetric return rates and wealth distribution influenced by the introduction of technical analysis into a behavioral agent based model
Comments: 18 pages and 46 figures
Subjects: General Finance (q-fin.GN); Mathematical Finance (q-fin.MF)

Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this relationship. In order to approximate the simulated market to the complexity of real markets, we consider that the investors are connected among them through a small world network; each one has its own psychological profile (Imitation, Anti-Imitation, Random); two different strategies for decision making: one of them is based on the trust neighborhood of the investor and the other one considers a technical analysis, the momentum of the market index technique. We analyze the market index fluctuations, the wealth distribution of the investors according to their psychological profiles and the rate of return distribution. Moreover, we analyze the influence of changing the psychological profile of the hub of the network and report interesting results which show how and when anti-imitation becomes the most profitable strategy for investment. Besides this, an intriguing asymmetry of the return rate distribution is explained considering the behavioral aspect of the investors. This asymmetry is quite robust being observed even when a completely different algorithm to calculate the decision making of the investors was applied to it, a remarkable result which, up to our knowledge, has never been reported before.

[4]  arXiv:1711.08356 [pdf, ps, other]
Title: Valuation of equity warrants for uncertain financial market
Authors: Foad Shokrollahi
Subjects: Pricing of Securities (q-fin.PR)

In this paper, within the framework of uncertainty theory, the valuation of equity warrants is investigated. Different from the methods of probability theory, the equity warrants pricing problem is solved by using the method of uncertain calculus. Based on the assumption that the firm price follows an uncertain differential equation, the equity warrants pricing formula is obtained for uncertain stock model.

Replacements for Thu, 23 Nov 17

[5]  arXiv:1702.07556 (replaced) [pdf, other]
Title: A closed-form representation of mean-variance hedging for additive processes via Malliavin calculus
Comments: 21 pages, 2 figures
Subjects: Mathematical Finance (q-fin.MF)
[6]  arXiv:1706.06355 (replaced) [pdf, other]
Title: Complex Correlation Approach for High Frequency Financial Data
Subjects: Statistical Finance (q-fin.ST)
[7]  arXiv:1710.11184 (replaced) [pdf, other]
Title: Correlations and Clustering in Wholesale Electricity Markets
Comments: 30 pages, several pictures
Subjects: Statistical Finance (q-fin.ST); Physics and Society (physics.soc-ph)
[ total of 7 entries: 1-7 ]
[ showing up to 2000 entries per page: fewer | more ]

Disable MathJax (What is MathJax?)