August 1st 2022 (ML-QUANT)

Some links for the month of July

Aug 1, 2022

There are a bunch of fun papers that came out in July, Dhagash Mehta (similarity research) and Hans Buehler (deep hedging) have been quite busy. In software, the team of FinRL seems to finally have developed a live version for their open source model, I haven’t tested it, but know that it was a popular request for some time now.

SSRN is lathered with ESG papers, the cyber risk premium paper caught my eye. Jonathan Kinlay has played around with synthetic data and trading strategies in the blog section. And two sigma reposted bidirectional RNN paper form 1997.

There are a few interesting tidbits in the world of podcasts (not a lot of quant). LinkedIn has some interesting takes, like “meta labelling rebranded as Corrective AI”, “TS anomaly datasets are useless”, “need for redefining factors to lower statistical thresholds”.

From twitter institutional VC investors are predictably bad.

ArXiv Top

Learning Embedded Representation of the Stock Correlation Matrix... (Score: 13.0) Bhaskarjit Sarmah, Nayana Nair, Dhagash Mehta, Stefano Pasquali (2022-07-14) Understanding non-linear relationships among financial instruments has various applications in investment processes ranging from risk management, portfolio construction and trading strategies. Here, w... (29 posts; 21 tweeters)

Supervised similarity learning for corporate bonds using Random... (Score: 12.99) Jerinsh Jeyapaulraj, Dhruv Desai, Peter Chu, Dhagash Mehta, Stefa (2022-07-10) Financial literature consists of ample research on similarity and comparison of financial assets and securities such as stocks, bonds, mutual funds, etc. However, going beyond correlations or aggregat... (26 posts; 20 tweeters)

Deep Hedging: Continuous Reinforcement Learning for Hedging of... (Score: 4.1) Phillip Murray, Ben Wood, Hans Buehler, Magnus Wiese, Mikko S. Pa (2022-07-15) We present a method for finding optimal hedging policies for arbitrary initial portfolios and market states. We develop a novel actor-critic algorithm for solving general risk-averse stochastic contro... (20 posts; 12 tweeters)

Towards a Theory of Maximal Extractable Value I: Constant Function... (Score: 1.75) Kshitij Kulkarni, Theo Diamandis, Tarun Chitra (2022-07-24) Maximal Extractable Value (MEV) represents excess value captured by miners (or validators) from users in a cryptocurrency network. This excess value often comes from reordering users transactions to m... (17 posts; 6 tweeters)

Learning Mutual Fund Categorization using Natural Language Processing (Score: 1.25) Dimitrios Vamvourellis, Mate Attila Toth, Dhruv Desai, Dhagash Me (2022-07-11) Categorization of mutual funds or Exchange-Traded-funds (ETFs) have long served the financial analysts to perform peer analysis for various purposes starting from competitor analysis, to quantifying p... (6 posts; 5 tweeters)

Pricing multi-asset derivatives by variational quantum algorithms (Score: 1) Kenji Kubo, Koichi Miyamoto, Kosuke Mitarai, Keisuke Fujii (2022-07-04) Pricing a multi-asset derivative is an important problem in financial engineering, both theoretically and practically. Although it is suitable to numerically solve partial differential equations to ca... (4 posts; 4 tweeters)

ETF Portfolio Construction via Neural Network trained on Financial... (Score: 1) Jinho Lee, Sungwoo Park, Jungyu Ahn, Jonghun Kwak (2022-07-04) Recently, the application of advanced machine learning methods for asset management has become one of the most intriguing topics. Unfortunately, the application of these methods, such as deep neural n... (4 posts; 4 tweeters)

Strategic Asset Allocation with Illiquid Alternatives (Score: 0.75) Eric Luxenberg, Stephen Boyd, Mykel Kochenderfer, Misha van Beek, (2022-07-15) We address the problem of strategic asset allocation (SAA) with portfolios that include illiquid alternative asset classes. The main challenge in portfolio construction with illiquid asset classes is ... (23 posts; 3 tweeters)

SSRN Top

Infrastructure as an Asset Class (pages: 36) Georg Inderst Georg Inderst Martin Lawrence Geofrey P. Stapledon (2011-06-11) Infrastructure as a new asset class is said to have several distinct and attractive investment characteristics. This article reviews concepts market developments and empirical evidence on the risk-ret... (2648 downloads; 7799 views)

The ESG - Innovation Disconnect: Evidence from Green Patenting (pages: 55) Lauren Cohen Umit G. Gurun Quoc Nguyen (2021-01-11) No firm or sector of the global economy is untouched by innovation. In equilibrium innovators will flock to (and innovation will occur where) the returns to innovative capital are the highest. In this... (1368 downloads; 4021 views)

Defining and Measuring Green Investments (pages: 54) Georg Inderst Christopher Kaminker Fiona Stewart (2016-03-07) This definitional stocktaking paper aims to provide a comprehensive review of the concepts and definitions related to "green" investments that are currently used in the market place. The purpose of th... (1249 downloads; 3319 views)

Does Alternative Data Improve Financial Forecasting? The Horizon Effect (pages: 60) Olivier Dessaint Thierry Foucault Laurent Frésard (2020-11-17) Existing research suggests that alternative data is mainly informative about short-term future outcomes. We show theoretically that the availability of short-term oriented data can induce forecasters ... (1007 downloads; 3307 views)

Incorporating Environmental Social and Governance (ESG) Factors into Fixed Income Investment (pages: 76) Georg Inderst Fiona Stewart (2018-06-13) This research report is the result of a partnership between the World Bank Group (WBG) and Government Pension Investment Fund (GPIF) of Japan initiated by the World Bank Groups President Jim Yong Kim ... (979 downloads; 3687 views)

One Size Fits All? High Frequency Trading Tick Size Changes and the Implications for Exchanges: Market Quality and Market Structure Considerations (pages: ) Thanos Verousis Pietro Perotti Georgios Sermpinis (2017-03-20) This paper offers a systematic review of the empirical literature on the implications of tick size changes for exchanges. Our focus is twofold: first we are concerned with the market quality implicati... (797 downloads; views)

Social Infrastructure Finance and Institutional Investors. A Global Perspective (pages: 45) Georg Inderst (2020-03-18) Social infrastructure has endured a long period of neglect in most developed and emerging countries with chronic underinvestment exposed by the coronavirus crisis 2020. The financial crisis 2007/08 le... (577 downloads; 2903 views)

Evaluating Hedge Fund Performance when Models are Misspecified (pages: 77) David Ardia Laurent Barras Patrick Gagliardini O. Scaillet (2020-09-18) Evaluating the performance of hedge funds is challenging because any benchmark model is unlikely to capture their numerous strategies. To assess the impact of model misspecification we develop a novel... (542 downloads; 1702 views)

The Cyber Risk Premium (pages: 46) Hao Jiang Naveen Khanna Qian Yang Jiayu Zhou (2020-07-15) Cyber risk is an important but latent source of risk in the economy. To estimate its impact on the asset market we use machine learning techniques to develop a firm-level measure of cyber risk. The me... (503 downloads; 2226 views)

GitHub Top

FinRL-Live-Trading (#1 ML-Quant) Deep Reinforcement Learning for Automated Stock Trading: An Ensemble Strategy. ICAIF 2020. Please star.... (0.32 score) Days Since Last Update: 14; Created: 2020-07-26; Stars: 1177

baselines (#3 ML-Quant) OpenAI Baselines: high-quality implementations of reinforcement learning algorithms... (0.23 score) Days Since Last Update: 29; Created: 2017-05-24; Stars: 12740

WallStreetBots (#5 ML-Quant) Boom or Bust... (0.19 score) Days Since Last Update: 11; Created: 2021-10-19; Stars: 17

pysystemtrade (#6 ML-Quant) Systematic Trading in python... (0.18 score) Days Since Last Update: 54; Created: 2015-11-27; Stars: 1584

Blogs Top

Improving Portfolio Correlation & Asset Allocation with Hedged Equity (CAIAAssociation) By Arnim S. Holzer, Global Macro Strategist and William Visconto, Co-Founder, Portfolio Manager at Easterly/EAB Risk Solutions. ... (caia.org; 2022-07-31)

What is the difference between Passive Hedging and Active Hedging? ⋆ Quantdare (Quantdare) A successful active strategy could turn this preliminary unwanted currency risk into an extra return. ... (quantdare.com; 2022-07-27)

Developing Trading Strategies With Synthetic Data (QUANTITATIVE RESEARCH AND TRADING) One of the main criticisms levelled at systematic trading over the last few years is that the over-use of historical market data has tended to produce curve-fitted strategies that perform poorly out o ... (jonathankinlay.com; 2022-07-26)

A Tale of Two Pivots: Transitioning from RAINFund, to RAINTrader, to TradingRooms (TradingRooms By RAIN Platforms) In 2019, when RAIN Platforms was incorporated, the company’s mission was to democratize the financial markets by providing the retail… ... (tradingroomshq.medium.com; 2022-07-25)

A New Approach to Generating Synthetic Market Data (QUANTITATIVE RESEARCH AND TRADING) The Importance of Synthetic Market Data The principal argument in favor of using synthetic data is that it addresses one of the major concerns about using real data series for modelling purposes: i.e. ... (jonathankinlay.com; 2022-07-25)

Why Getting Risk Right is Wrong (CAIAAssociation) By Dan diBartolomeo, President and founder of Northfield Information Services, Inc. Based in Boston since 1986, Northfield develops quantitative models of financial markets. ... (caia.org; 2022-07-25)

How to Web Scrape Upcoming Earnings Dates in 55 Lines of Python Code (Danny Groves) A quick and easy way to find the estimated dates of earnings releases ... (medium.com; 2022-07-24)

Bidirectional Recurrent Neural Networks (Two Sigma) ... (twosigma.com; 2022-07-18)

Q2 2022 Commentary (Flirting with Models) In this quarter’s commentary, we: Provide an analysis of this quarter’s returns, both at a high level and a detailed attribution. You can read more here. Corey HoffsteinCorey is co-founder and Chief I ... (blog.thinknewfound.com; 2022-07-18)

Podcasts Top

Didac Queralt, "Pawned States: State Building in the Era of International Finance" (Princeton UP, 2022) (Various) How foreign lending weakens emerging nations In the nineteenth century, many developing countries turned to the credit houses of Europe for sovereign loans to balance their books and weather major fis (2022-07-28)

Erin Miles, Bridgewater Associates – Who Will Prove Most Vulnerable to the Pullback in Liquidity? (The Best Investment Writing Volume 6) (Meb Faber) Today’s episode features Erin Miles reading her piece, Who Will Prove Most Vulnerable to the Pullback in Liquidity? Erin joined Bridgewater in 2009, and is currently Co-Lead of Equities Research and (2022-07-27)

Andrew Beer - Replicating Hedge Fund Beta (S5E9) (Corey) My guest in this episode is Andrew Beer, co-founder of Dynamic Beta Investments. Andrew has spent the last 15 years trying to pioneer the adoption of hedge fund replication strategies. The core thesi (2022-07-25)

Graham Weaver on Private Equity (Bloomberg) Bloomberg Radio host Barry Ritholtz speaks with Graham Weaver, who is the founder and CEO of Alpine Investors, a PeopleFirst private equity firm in San Francisco which invests in software and services (2022-07-23)

Richard Ennis – The Modern Endowment Story: A Ubiquitous U.S. Equity Risk Premium (The Best Investment Writing Volume 6) (Meb Faber) Today’s episode features Richard Ennis reading his piece, The Modern Endowment Story: A Ubiquitous U.S. Equity Risk Premium. Richard managed money at Transamerica and pioneered quant investing in the (2022-07-22)

Harel Jacobson - Trading FX Volatility (S5E10) (Corey) In this episode I speak with Harel Jacobson, an FX volatility trader. There is a lot that makes the FX volatility market unique. For starters, the end users are more focused on hedging cash-flow and ... (2022-08-01)

#431 – Scott Reynolds Nelson – How Wheat Made The Modern World (Meb Faber) Today’s guest is Scott Reynolds Nelson, the author of Oceans of Grain: How American Wheat Remade the World, and a Professor at the University of Georgia, where he teaches about international finance a... (2022-07-26)

User Perceptions of Problematic Ads (Data Skeptic) Eric Zeng joins us to discuss his study around understanding bad ads and efforts that can be taken to limit bad ads online. He discussed how he and his co authors scrapped a large amount of ad data, a... (2022-07-25)

Antti Ilmanen (Corey) My guest in this episode needs no introduction: Antti Ilmanen, co-head of Portfolio Solutions at AQR, award winning researcher, and author of the books Expected Returns and the recently published Inve... (2022-07-18)

Antti Ilmanen on Expected Returns (Bloomberg) Bloomberg Radio host Barry Ritholtz speaks with Antti Ilmanen, who is the principal and global co-head of the portfolio solutions group at AQR Capital Management. His most recent book, "Investing Amid... (2022-07-16)

Dan Rasmussen, Verdad Advisers – Emerging Markets Crisis Investing (The Best Investment Writing Volume 6) (Meb Faber) Today’s episode features Dan Rasmussen read his piece, Emerging Markets Crisis Investing. Dan is the Founder and Portfolio Manager for Verdad Advisers, a global investment firm that provides a public... (2022-07-15)

Ranji Nagaswami, SVP Global: A Primer on Private Credit (CFA Society) Our guest today is Ranji Nagaswami, Managing Director, Chief Strategy/Commercial Officer at SVP Global. Headquartered in Greenwich, CT. SVP is a global investment firm focused on distressed debt and p... (2022-07-14)

Why Environmentalism and ESG is Failing (Dimitri) I recently made a video discussing the SEC's proposal to have all publicly traded firms calculate their environmental impact. At a first glance it sounds very reasonable and who doesn't want to help t... (2022-07-12)

Artificial Intelligence and Auction Design (Data Skeptic) ... (2022-07-11)

Ralph Smith - Scientific Investing in Fixed Income (S5E7) (Corey) My guest this episode is Ralph Smith, Head of Research at BlueCove. BlueCove offers long-only and market-neutral mandates in corporate credit and interest rate markets, with an emphasis on utilizing a... (2022-07-11)

Spencer Jakab on the Death of Meme Stocks (Bloomberg) Bloomberg Radio host Barry Ritholtz speaks with the Wall Street Journal’s Spencer Jakab, author of “The Revolution That Wasn’t: GameStop, Reddit and the Fleecing of Small Investors.” Jakab, who edits ... (2022-07-09)

#427 – Mark Yusko – "With Every Investment We Become Richer or Wiser, Never Both" (Meb Faber) Today’s guest is Mark Yusko, Chief Investment Officer of Morgan Creek Capital Management and the Managing Partner of Morgan Creek Digital. In today’s episode, Mark covers the evolution he’s seen in th... (2022-07-06)

Adrienne Buller, "The Value of a Whale: On the Illusions of Green Capitalism" (Manchester UP, 2022) (Various) In this searing and insightful critique, Adrienne Buller examines the fatal biases that have shaped the response of our governing institutions to climate and environmental breakdown, and asks: are the... (2022-07-05)

Why Automated Validations Fail (Dimitri) Why does automating model validations fail?Goals/Plan:1) Specify the model2) Runs the development model for a replication check3) Output of all possible analysis for that model type is produced includ... (2022-07-05)

LinkedIn Top

Posted by Charles-Albert Lehalle (Comments: 23) Dear all, I am very happy (and very proud) to announce the availability of a new book on financial markets. With Amine R., Christophe Lesieur, Pascal Gibart and Julien Leprun, we explain how the finan... (2022-07-28; Score: 10; Likes: 370)

Liked by Alec Schmidt (Comments: 0) Beyond humbled to have another #quant MVP in Matthew Dixon! I have been following Matthew's work and learning from him for over a decade and have found him to be one of the smartest minds in #machinel... (2022-07-25; Score: 6; Likes: 132)

Posted by Julien Guyon (Comments: 3) I finally found the time to write this article on Dispersion-Constrained Martingale Schrödinger Bridges and the Joint Entropic Calibration of Stochastic Volatility Models to S&P 500 and VIX Smiles. I ... (2022-07-17; Score: 6; Likes: 36)

Posted by Guillaume Coqueret (Comments: 2) Significance thresholds play an important role in the discovery of new asset pricing factors. In their papers on the cross-section of expected returns, Harvey et al. make the case for higher bars, e... (2022-07-11; Score: 6; Likes: 23)

Liked by Prof. Alexander Lipton (Comments: 2) I am happy and proud that Maryna Viazovska, an alumna of my high school (Kyiv Natural Science Lyceum No 145) and my university (Taras Shevchenko National University of Kyiv), has become the second wom... (2022-07-05; Score: 6; Likes: 112)

Posted by Álvaro Cartea (Comments: 1) We are very happy to share our latest paper on "Conditionally Elicitable Dynamic Risk Measures for Deep Reinforcement Learning" with Anthony Coache and Sebastian JaimungalOxford-Man Institute of Quant... (2022-07-06; Score: 5; Likes: 55)

Liked by Carlos Salas, MSc, CFA, CQF (Comments: 73) NEW RESEARCH: Does #ESGinvesting affect financial risk & return? Numerous studies have investigated this issue. Reviewing more than 2,000 studies, Friede, Busch, and Bassen (2015) conclude: “the busin... (2022-07-06; Score: 5; Likes: 366)

Liked by Charles-Albert Lehalle (Comments: 61) [RECOMPENSE] Le mathématicien français, Hugo Duminil-Copin, professeur à l’Université de Genève et à l’Institut des Hautes Études Scientifiques - IHES, membre du Laboratoire Alexander Grothendieck (CN... (2022-07-05; Score: 5; Likes: 4363)

Posted by Marcos Lopez de Prado (Comments: 2) "Corrective AI" (AKA meta-labeling) is a machine learning approach that can help improve the Sharpe ratio of investment strategies by exploiting the precision-recall trade-off: https://risk.net/795079... (2022-07-05; Score: 5; Likes: 126)

Liked by Alec Schmidt (Comments: 5) Excited to have my Op-Ed piece on inflation dynamics and trend-following strategies featured at the Financial Times online.The focus is on the relationship between current inflation/macro dynamics and... (2022-07-29; Score: 4; Likes: 88)

Posted by Wesley Gray, Ph.D. (Comments: 3) While #sustainable investing continues to gain in popularity, economic theory suggests that if a large enough proportion of investors choose to favor companies with high sustainability ratings (green ... (2022-07-28; Score: 4; Likes: 6)

Liked by Mauro Cesa (Comments: 4) In memory of Michael Spector, our colleague and friend... (2022-07-25; Score: 4; Likes: 63)

Liked by Igor Halperin (Comments: 17) Last year my student and I wrote a paper pointing out the most time series anomaly detection benchmark datasets are worthless [a]. Among many other flaws, they are trivial. To make “trivial”, more for... (2022-07-11; Score: 4; Likes: 196)

Liked by Charles-Albert Lehalle (Comments: 2) We regret to announce that Ole Barndorff-Nielsen, ISI Elected Member and Professor Emeritus at Aarhus University at the Thiele Centre for Applied Mathematics in Natural Science, passed away on 26 June... (2022-07-07; Score: 4; Likes: 37)

Liked by Charles-Albert Lehalle (Comments: 7) Congratulations to #PrincetonU professor June Huh, winner of the 2022 Fields Medal — often referred to as "the Nobel Prize of mathematics" — in recognition of his work in combinatorics. 👏... (2022-07-05; Score: 4; Likes: 1193)

Liked by Álvaro Cartea (Comments: 42) Oxford Mathematician Prof James Maynard has been awarded a Fields Medal, the highest honour a young mathematician can attain.Professor Maynard, from Oxford's Mathematical Institute, has been awarded a... (2022-07-05; Score: 4; Likes: 3593)

Liked by Carlos Salas, MSc, CFA, CQF (Comments: 3) Looking forward to giving the opening keynote at tomorrow's Quant Summit Europe. I'll be talking about the latest exciting developments for Deep Hedging. #ai #finance #quant #hedging... (2022-07-05; Score: 4; Likes: 85)

Liked by Álvaro Cartea (Comments: 2) Very sad to read that Prof. Ole Eiler Barndorff-Nielsen passed away (March 18, 1935 - June 26, 2022)His books are masterpieces of statistics and probability. A great contributor to #InformationGeometr... (2022-07-04; Score: 4; Likes: 136)

Liked by Petter Kolm (Comments: 9) Portfolio FactoryI am happy to share that my recent paper on building a scalable investment process has been selected as lead article in the new Journal of Portoliomanagement. The paper mathematically... (2022-07-04; Score: 4; Likes: 140)

Liked by Prof. Alexander Lipton (Comments: 33) Congratulations to EPFL mathematician Maryna Viazovska who has just been awarded the Fields Medal! She resolved the problem of sphere packing in 8 and 24 dimensions, and is the second woman ever to re... (2022-07-05; Score: 4; Likes: 3587)