Quant Letter: May 2023, Week 3

The first weekly quantitative finance newsletter

The last year I trialed a monthly newsletter, I was pleasantly surprised for it to reach around 2,600 subscribers. A survey of subscribers showed that asset managers (25%), academics (18%), hedge funds (14%) , and prop firms (12%), make up the bulk of subscribers.

After gathering some data it seemed that most readers just want some rank ordering with easily clickable links. Almost all are in favor of a weekly newsletter and almost all in favor of removing “clutter”, including author names! (Sorry academics). So this is the first iteration, it will run weekly for the rest of the year.

In the beginning there will be some mistakes, this project runs on many lines of code, enjoy the first iteration!

ArXiv

Finance

Efficient Nested Deep Hedging: Study proposes nested deep hedging method for derivatives with market frictions using neural networks. (2023-05-20, shares: 9)

Intelligent Credit Bond Default Forecasting: Intelligent forecasting framework for default risk in China's bond market using ConvLSTM neural network. (2023-05-20, shares: 6)

Dynamic Risk Measures Budgeting Allocation: Risk budgeting allocation approach developed using dynamic risk contributions and deep learning. (2023-05-18, shares: 5)

Performance Evaluation of VaR Portfolio Insurance: Study compares VaR-based and constant proportion portfolio insurance strategies in regime-switching framework. (2023-05-21, shares: 4)

Extreme ATM Skew in Local Volatility Model: Local volatility model with two possible values for volatility analyzed using pricing formulas based on Skew Brownian motion. (2023-05-18, shares: 4)

VBA Portfolio Creation Software: VBA software component for optimal portfolio creation using two methods demonstrated with real-time series data. (2023-05-22, shares: 4)

Socially Responsible Investing with Machine Learning: MV model amended to consider ESG scores for socially responsible investing. (2023-05-21, shares: 4)

Interpolation with Quadratic Local Variance Gamma Model: Piecewise quadratic local variance function formulated for arbitrage-free interpolation of market quotes. (2023-05-23, shares: 3)

Double Levy Jumps in European Option Pricing: European option pricing formula provided under double Levy jumps model with series solution and numerical experiments. (2023-05-18, shares: 2)

Effective Factor Learning with Gated Deeper Models: layer deep neural network proposed for predicting excess returns with improved performance and potential for optimizing investment strategies. (2023-05-18, shares: 2)

Economics

Credit Card Payments: Consumers tend to pay credit card minimums, but an intervention can increase payments. (2023-05-19, shares: 3)

Monetary Policy and Volatility: A new model classifies monetary announcements based on their impact on volatility. (2023-05-20, shares: 3)

Federal Reserve's QE Programs and US Economy: Quantitative easing positively affected US GDP but did not impact inflation. (2023-05-21, shares: 2)

Leadership and Team Processes in Construction Projects: Transformational leadership has a positive relationship with team processes in construction project teams. (2023-05-22, shares: 2)

AI Spectator: External tools can help with moral assessment. (2023-05-19, shares: 2)

EU AI Regulation Preferences: Non-state actors want AI regulation. (2023-05-19, shares: 2)

Global AI Governance: Research agenda for global governance of AI. (2023-05-19, shares: 2)

TQM and Organizational Outcomes: Total Quality Management improves organizational performance. (2023-05-22, shares: 2)

Miscellaneous

Responsible AI: Article 1: Risks of AI in manufacturing explored, with focus on responsible and ethical AI. (2023-05-19, shares: 3)

Deformed MP Distribution for Correlated TS: Article 2: Study of eigenvalue distribution of Wishart matrix with temporal correlation. (2023-05-22, shares: 2)

Unimodal Maps with Heteroscedastic Noise: Article 3: Investigation of mathematical properties of perturbed unimodal smooth maps, with example linked to systemic risk. (2023-05-22, shares: 2)

Fair Division Algorithms and Incentives: Article 4: Development of heuristic algorithm for fair division of discrete items, with potential for strategic deviations and proposed strengthening. (2023-05-19, shares: 2)

Crypto & Blockchain

ChatGPT's Impact on AI Crypto Assets: New method proposed to compute security prices without third party involvement. (2023-05-22, shares: 17)

Trustless Price Feeds for Crypto: A new report suggests that the use of blockchain technology in the healthcare industry could save up to $100 billion annually by 2025, through improved data management, reduced fraud, and increased efficiency. (2023-05-22, shares: 11)

Historical Trending

Ebacktesting: A new backtesting procedure for Expected Shortfall forecasts is proposed using e-values and e-processes. (2022-08-27, shares: 95)

Reinforcement Learning for Interbank Policy: Reinforcement learning is used to analyze the effect of a policy recommendation on an artificial interbank market. (2022-04-14, shares: 95)

Closed-Form Expression for Ratemaking: A surrogate modeling approach is proposed to compute Bayesian credibility premiums for a given model. (2022-11-12, shares: 68)

Deep Reinforcement Trading Analysis: The performance of model-free deep reinforcement learning traders in a market environment with different mean-reverting factors is investigated. (2021-04-29, shares: 42)

Change point detection in dGGMs: A Bayesian model is developed to capture changes in dependence across US industry stock portfolios during COVID-19. (2022-08-01, shares: 26)

Reverse optimization formula: An optimization formula is established for Expected Shortfall and generalized to optimized certainty equivalents. (2022-03-04, shares: 21)

Neural variance reduction for SDEs: Neural SDEs with control variates are proposed to reduce variance in Monte Carlo simulations in finance. (2022-09-26, shares: 18)

Robust incremental learning for tabular data: A robust incremental learning model is presented for regression tasks on temporal tabular datasets. (2023-03-14, shares: 16)

SSRN