Quant Letter: October 2024, Week-4
Quant Letter: October 2024, Week-4
Weekly (68th Edition)
ArXiv
Finance
Superelliptical Market Maker: The article discusses a new automated market maker model that can handle both negative and positive asset pricing, useful in electricity, energy, and derivatives markets, and compares it to a replicating market maker. (2024-10-17, shares: 5)
Portfolio Management with Default: The paper explores the optimal portfolio delegation between an investor and a portfolio manager in the event of a random default time, using mathematical methods and a deep-learning algorithm to study investment decisions and compensation structures. (2024-10-17, shares: 3)
Historical Trending
Deep RL for Volatility Fitting: The article discusses the use of Deep Reinforcement Learning in solving volatility issues in equity derivatives, showing its effectiveness and adaptability in handling complex functions and online learning. (2024-10-15, shares: 5)
Modeling Sparse Order Books in Electricity Trading: The paper presents a new model for simulating sparse limit order books in illiquid markets like the European intraday electricity market, using an inhomogeneous Poisson process for order arrivals and cancellations. (2024-10-09, shares: 5)
GANs for Financial Time Series: The study examines the capability of Generative Adversarial Networks in learning complex financial time series patterns, highlighting that their performance is greatly influenced by the generator architecture chosen. (2024-10-13, shares: 5)
Cross-Currency Basis Swaps Pricing: The article discusses the pricing and hedging methods for financial products linked to the SOFR and AONIA, which have replaced LIBOR as the main benchmark rate for borrowing costs. (2024-10-11, shares: 4)
Scalable Regression with Reference Sets: The paper introduces a new methodology for Distribution Regression on stochastic processes, resolving estimation uncertainties and expanding its use in various learning tasks across different fields. (2024-10-11, shares: 3)
Model Risk and Semi-Static Hedging: The study expands on previous research on model risk distributionally robust sensitivities, introducing the minimization of the distributionally robust problem in relation to semi-static hedging strategies and outlining the optimal strategies. (2024-10-09, shares: 3)
SSRN
Recently Published
Quantitative
MGARCH Model: A new study using a multivariate GARCH model identifies shocks and volatility spillovers in speculative return systems, using SP 500 returns, Treasury yields, and the U.S. Dollar Index. (2024-10-17, shares: 7.0)
Accounting Comparability: The research indicates that firms with higher accounting comparability have lower ESG reputational risk, reduced capital costs, and increased investment activity, emphasizing the role of comparability in financial decision-making and risk management. (2024-10-20, shares: 3.0)
Reinforcement Learning in Market-Making: The paper presents a deep reinforcement learning framework for optimal market-making trading, using the Soft Actor-Critic algorithm to manage complex, high-dimensional problems with continuous state and action spaces. (2024-10-17, shares: 3.0)
Technology Value Prediction: The study introduces a deep-learning model that predicts the economic value of technology using patent and firm data, showing better prediction performance than other models. (2024-10-19, shares: 3.0)
IPO Pricing Prediction with Lasso-Neural Networks: A new model using Lasso neural networks has been developed to predict IPO pricing for Chinese companies, with retained earnings per share being a key factor. (2024-10-17, shares: 5.0)
Financial
Leverage Corrections in ETF Price Discovery: New measures introduced in a study show that regular ETFs dominate the price discovery process for the SP 500 index, correcting the leverage bias. (2024-10-18, shares: 2.0)
Bank Securities Management: A study reveals that US banks increased their interest rate risk in 2022-23 due to rapid rate changes and reluctance to sell bonds at a discount. (2024-10-18, shares: 6.0)
Role of Foreign Exchange Reserves in Dollarization: The research indicates that active intervention in foreign exchange can stabilize economic volatility in economies heavily reliant on the US dollar. (2024-10-19, shares: 7.0)
FX Volatility: High foreign exchange volatility results in higher currency carry returns during high ambiguity, as investors avoid trading, a study shows. (2024-10-21, shares: 7.0)
Asset Allocation: An article suggests that dynamic asset allocation, which adjusts based on expected returns and risk, may be more beneficial than static allocation, as supported by academic research. (2024-10-20, shares: 2.0)
Firm Leverage: A study finds that low-leverage firms reduce investment more than high-leverage firms when government debt increases, due to higher taxation weakening their cash flows. (2024-10-21, shares: 3.0)
Euler Equation Testing with Stock Market Data: A study using stock market data found a pattern of failure among different groups of listed firms, significantly linked to firm characteristics associated with well-known stock anomalies. (2024-10-19, shares: 2.0)
Recently Updated
Quantitative
Mutual Funds & Low-Risk Anomaly: Mutual funds' demand pressure on high-beta assets following market changes leads to overpricing and lower expected returns, causing the low-risk anomaly in stock returns. (2024-10-15, shares: 3.0)
Credit Spread and Business Cycle: The study suggests that inaccuracies in credit spread predictions, indicative of heightened market optimism, can strongly forecast future economic downturns, with a significant increase in prediction errors leading to a 1.47% decrease in GDP growth. (2024-06-26, shares: 3.0)
Financial
Beta Replication Challenges: The article discusses the challenges of trendfollowing investment strategies, suggesting replication of a broad index of funds as a solution, but warns of risks from regression-based replication. (2024-10-15, shares: 205.0)
Intelligent Forecasts in Portfolio Optimization: The study proposes an optimization framework for the top 500 U.S. stocks, emphasizing the use of characteristic information for stable weights and consistent outperformance. (2023-03-21, shares: 2.0)
Futures Market Information in Forecasting: The study uses Chinese futures market data to predict macroeconomic variables, finding that financial futures data slightly improve GDP forecasts, while commodity futures significantly enhance PPI forecasts. (2024-10-01, shares: 3.0)
Fallacies in CAPM Intuition: The article argues that firm-specific risk significantly impacts beta and the Market Risk Premium (MRP), contradicting the standard intuition for the CAPM. (2024-10-12, shares: 2.0)
Hedging Strategy with Transaction Costs: The traditional binomial model for derivative security pricing is enhanced to include transaction costs, portfolio constraints, and dividend-paying assets, aiming to identify the best hedging strategy. (2024-04-01, shares: 2.0)
Activist Investing: Credit Effects: Hedge fund activism increases firm value but negatively impacts existing bondholders, with those selling target firm debt post-intervention experiencing higher losses. (2024-10-14, shares: 2.0)
Retail Investor Attention and Fund Performance: A metric called Total Views, which measures retail investor attention to mutual funds, can predict retail fund flows and performance, with high-performing funds attracting more inflows. (2024-09-20, shares: 2.0)
ArXiv ML
Recently Published
ML Input Data Pipelines with cedar: The article presents cedar, a programming framework for machine learning data pipelines, which enhances performance by applying complex optimizations, resulting in up to 10.65x improvement compared to existing systems. (2024-01-17, shares: 23)
Scalable Machine Unlearning with S3T: The research introduces S3T, a framework that can efficiently remove the impact of a specific training data instance from a trained machine learning model without the need for complete retraining. (2024-06-24, shares: 16)
GitHub
Finance
DQL for Algorithmic Trading: The article explores the use of Deep QLearning for algorithmic trading strategies. (2024-03-06, shares: 12.0)
RL for Finance Code: The article offers the coding resources for a book on reinforcement learning in financial applications. (2024-10-17, shares: 5.0)
Fast Data Pipeline Building with Ploomber: The article introduces a quick method for creating versatile data pipelines that can be developed and deployed flexibly. (2020-01-20, shares: 3503.0)
Trending
PPS in Python: The article Predictive Power Score PPS in Python explains how Python can be used to apply the Predictive Power Score, a tool for data analysis. (2020-04-17, shares: 1112.0)
Official Inference Framework: Official inference framework for 1bit LLMs introduces a formal framework for making predictions using 1bit Long-Short Term Memory models. (2024-08-05, shares: 761.0)
LightRAG RetrievalAugmented Generation: LightRAG Simple and Fast RetrievalAugmented Generation presents LightRAG, an efficient technique for retrieval-augmented generation in machine learning. (2024-10-02, shares: 3908.0)
LinkedIn
Trending
AI Reasoning: The author congratulates their first PhD student, Shaun Li, for successfully defending a thesis on a mathematical model for SPX & VIX. (2024-10-19, shares: 3.0)
The Power of Neural Operators: The power and application of neural operators in the field of artificial intelligence finance are explored in this piece. (2024-10-19, shares: 11.0)
Neudata Paris Talk: The author is set to discuss economic thinking in relation to alternative data at Neudata's Paris Data Day on October 30th. (2024-10-22, shares: 5.0)
Livestream Available: A special track on machine learning advances for finance will be co-organized at the Applied Machine Learning Days in Switzerland in February 2025. (2024-10-22, shares: 4.0)
Podcasts
Portable Alpha: The podcast explores Portable Alpha, a financial strategy that combines asset classes with positive expected returns and core assets to enhance market performance, diversification, and client behavior. (2024-10-19, shares: 18)
AI in Finance: Bo Xu from Boston Consulting Group talks about the applications, challenges, and effects of generative AI in financial risk management, including data leakage, intellectual property protection, and third-party risk issues. (2024-10-17, shares: 9)
Financial History with Dr. Bryan Taylor: Dr. Bryan Taylor analyzes financial history over the past 800 years to enhance our understanding of future returns on stocks, bonds, and bills. (2024-10-18, shares: 4)
News
Hedge Fund Trading Limited: A Beacon Platform Inc. survey shows hedge funds are cutting back on trading due to tighter risk controls, particularly in credit trading. (2024-10-17, shares: 7)
Hedge Funds Recruit Segantii Alumni: Bloomberg reports that over half of the employees who left Segantii Capital Management since May have secured jobs at competing hedge funds amidst insider trading allegations. (2024-10-18, shares: 5)
Quants Target Betting: The article discusses the duties and importance of quantitative sports traders. (2024-10-22, shares: 3)
Quant Managers Pursue Gains with AI and Tech: Quant managers are utilizing AI and other technologies for potential financial gains. (2024-10-21, shares: 2)
Twitter
Quantitative
Commodity Factors and Pairs Trading Recap: The article explores various financial topics such as commodity factors, pairs trading in option markets, industry momentum, volatility, and suggests relevant blogs, repos, and podcasts. (2024-10-22, shares: 4)
GenAI Synthetic Data Generation: The article highlights the importance of Synthetic Data Generation in training new GenAI models and its various applications. (2024-10-22, shares: 1)
Beta in Trend-Following: Promise and Pitfalls: The article reviews a new paper by sbraun27 and Juliusz Jabłecki on the benefits and challenges of replication in trend-following beta. (2024-10-17, shares: 1)
Stock Return Prediction Signal Automation: The article examines a paper on the use of OpenAI GPT4o for automating stock return prediction signals and its ability to adapt to market changes. (2024-10-22, shares: 0)
Miscellaneous
Factor Portfolios & Transaction Costs: The article explores a new episode focusing on the endurance of factor portfolios in the face of transaction costs. (2024-10-19, shares: 0)
Market Punishment for Diversifiers: The article debates the potential losses from market diversification versus investing in individual stocks. (2024-10-18, shares: 0)
SigKAN Networks for Time Series: The article presents SigKAN SignatureWeighted KolmogorovArnold Networks for Time Series, including Python GitHub and paper references. (2024-10-17, shares: 0)
KolmogorovArnold TimeSeries Notebook: The article showcases a raw KolmogorovArnold TimeSeries notebook. (2024-10-17, shares: 0)