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International Journal of Theoretical and Applied Finance最新文献

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Dollar Cost Averaging Returns Estimation 美元成本平均收益估算
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-12-17 DOI: 10.1142/S0219024923500036
Hayden Brown
{"title":"Dollar Cost Averaging Returns Estimation","authors":"Hayden Brown","doi":"10.1142/S0219024923500036","DOIUrl":"https://doi.org/10.1142/S0219024923500036","url":null,"abstract":"Given a geometric Brownian motion wealth process, a log-Normal lower bound is constructed for the returns of a regular investing schedule. The distribution parameters of this bound are computed recursively. For dollar cost averaging (equal amounts in equal time intervals), parameters are computed in closed form. A lump sum (single amount at time 0) investing schedule is described which achieves a terminal wealth distribution that matches the wealth distribution indicated by the lower bound. Results are applied to annual returns of the S&P Composite Index from the last 150 years. Among data analysis results, the probability of negative returns is less than 2.5% when annual dollar cost averaging lasts over 40 years.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48975807","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 1
MODELING LIFETIME EXPECTED CREDIT LOSSES ON BANK LOANS 对银行贷款的终身预期信贷损失进行建模
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-12-09 DOI: 10.1142/s0219024921500394
Thamayanthi Chellathurai
{"title":"MODELING LIFETIME EXPECTED CREDIT LOSSES ON BANK LOANS","authors":"Thamayanthi Chellathurai","doi":"10.1142/s0219024921500394","DOIUrl":"https://doi.org/10.1142/s0219024921500394","url":null,"abstract":"The guidelines of various Accounting Standards require every financial institution to measure lifetime expected credit losses (LECLs) on every instrument, and to determine at each reporting date if there has been a significant increase in credit risk since its inception. This paper models LECLs on bank loans given to a firm that has promised to repay debt at multiple points over the lifetime of the contract. The LECL can be written as a sum of ECLs (estimated at reporting date) incurred at debt repayment times. The ECL at any debt repayment time can be written as a product of the probability of default (PD), the expected value of loss given default and the exposure at default. We derive a stochastic dynamical equation for the value of the firm’s asset by incorporating the dynamics of the factors. Also, we show how the LECL and the term structure of the PD can be estimated by solving a Black–Scholes–Merton like partial differential equation. As an illustration, we present the numerical results for the various credit loss indicators of a fictitious firm when the dynamics of the short-term interest rate is characterized by a Cox–Ingersoll–Ross mean-reverting process.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42680262","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
A Stochastic Control Approach to BID-ASK Price Modelling BID-ASK价格模型的随机控制方法
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-12-04 DOI: 10.1142/s0219024922500212
E. J. C. Dela Vega, R. Elliott
{"title":"A Stochastic Control Approach to BID-ASK Price Modelling","authors":"E. J. C. Dela Vega, R. Elliott","doi":"10.1142/s0219024922500212","DOIUrl":"https://doi.org/10.1142/s0219024922500212","url":null,"abstract":"This paper develops a model for the bid and ask prices of a European type asset by formulating a stochastic control problem. The state process is governed by a modified geometric Brownian motion whose drift and diffusion coefficients depend on a Markov chain. A Girsanov theorem for Markov chains is implemented for the change of coefficients, including the diffusion coefficient which cannot be changed by the usual Girsanov theorem for Brownian motion. The price of a European type asset is then determined using an Esscher transform and a system of partial differential equations. A dynamic programming principle and a maximum/minimum principle associated with the stochastic control problem are then derived to model bid and ask prices. These prices are not quotes of traders or market makers but represent estimates in our model on which reasonable quantities could be traded.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44313708","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Author Index Volume 24 (2021) 作者索引第24卷（2021）
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-12-01 DOI: 10.1142/s0219024921990016
{"title":"Author Index Volume 24 (2021)","authors":"","doi":"10.1142/s0219024921990016","DOIUrl":"https://doi.org/10.1142/s0219024921990016","url":null,"abstract":"","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"48174382","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
PORTFOLIO INSURANCE UNDER ROUGH VOLATILITY AND VOLTERRA PROCESSES 粗糙波动和伏特拉过程下的投资组合保险
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-11-24 DOI: 10.1142/s0219024921500369
Jean-Loup Dupret, Donatien Hainaut
{"title":"PORTFOLIO INSURANCE UNDER ROUGH VOLATILITY AND VOLTERRA PROCESSES","authors":"Jean-Loup Dupret, Donatien Hainaut","doi":"10.1142/s0219024921500369","DOIUrl":"https://doi.org/10.1142/s0219024921500369","url":null,"abstract":"Affine Volterra processes have gained more and more interest in recent years. In particular, this class of processes generalizes the classical Heston model and the more recent rough Heston model. The aim of this work is hence to revisit and generalize the constant proportion portfolio insurance (CPPI) under affine Volterra processes. Indeed, existing simulation-based methods for CPPI do not apply easily to this class of processes. We instead propose an approach based on the characteristic function of the log-cushion which appears to be more consistent, stable and particularly efficient in the case of saffine Volterra processes compared with the existing simulation techniques. Using such approach, we describe in this paper several properties of CPPI which naturally result from the form of the log-cushion’s characteristic function under affine Volterra processes. This allows to consider more realistic dynamics for the underlying risky asset in the context of CPPI and hence build portfolio strategies that are more consistent with financial data. In particular, we address the case of the rough Heston model, known to be extremely consistent with past data of volatility. By providing a new estimation procedure for its parameters based on the PMCMC algorithm, we manage to study more accurately the true properties of such CPPI strategy and to better handle the risk associated with it.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-11-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"42638870","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 5
LATENCY AND LIQUIDITY RISK 延迟和流动性风险
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-11-11 DOI: 10.1142/s0219024921500357
ÁLVARO CARTEA, SEBASTIAN JAIMUNGAL, LEANDRO SÁNCHEZ-BETANCOURT
{"title":"LATENCY AND LIQUIDITY RISK","authors":"ÁLVARO CARTEA, SEBASTIAN JAIMUNGAL, LEANDRO SÁNCHEZ-BETANCOURT","doi":"10.1142/s0219024921500357","DOIUrl":"https://doi.org/10.1142/s0219024921500357","url":null,"abstract":"Latency (i.e. time delay) in electronic markets affects the efficacy of liquidity taking strategies. During the time liquidity, takers process information and send marketable limit orders (MLOs) to the exchange, the limit order book (LOB) might undergo updates, so there is no guarantee that MLOs are filled. We develop a latency-optimal trading strategy that improves the marksmanship of liquidity takers. The interaction between the LOB and MLOs is modeled as a marked point process. Each MLO specifies a price limit so the order can receive worse prices and quantities than those the liquidity taker targets if the updates in the LOB are against the interest of the trader. In our model, the liquidity taker balances the tradeoff between the costs of missing trades and the costs of walking the book. In particular, we show how to build cost-neutral strategies, that on average, trade price improvements for fewer misses. We employ techniques of variational analysis to obtain the price limit of each MLO the agent sends. The price limit of an MLO is characterized as the solution to a class of forward–backward stochastic differential equations (FBSDEs) driven by random measures. We prove the existence and uniqueness of the solution to the FBSDE and numerically solve it to illustrate the performance of the latency-optimal strategies.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138532132","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Correlation Estimation in Hybrid Systems 混合系统中的相关估计
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-11-11 DOI: 10.1142/S0219024923500085
Baron Law
{"title":"Correlation Estimation in Hybrid Systems","authors":"Baron Law","doi":"10.1142/S0219024923500085","DOIUrl":"https://doi.org/10.1142/S0219024923500085","url":null,"abstract":"A simple method is proposed to estimate the instantaneous correlations between state variables in a hybrid system from the empirical correlations between observable market quantities such as spot rate, stock price and implied volatility. The new algorithm is extremely fast since only low-dimension linear systems are involved. If the resulting matrix from the linear systems is not positive semidefinite, the shrinking method, which requires only bisection-style iterations, is recommended to convert the matrix to positive semidefinite. The square of short-term at-the-money implied volatility is suggested as the proxy for the unobservable stochastic variance. When the implied volatility is not available, a simple trick is provided to fill in the missing correlations. Numerical study shows that the estimates are reasonably accurate, when using more than 1,000 data points. In addition, the algorithm is robust to misspecified interest rate model parameters and the short-sampling-period assumption. G2++ and Heston are used for illustration but the method can be extended to other affine term structure, local volatility and jump diffusion models, with or without stochastic interest rate.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-11-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44391699","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
Coherent Risk Measure on L0: NA Condition, Pricing and Dual Representation L0:NA条件下的一致风险测度、定价和对偶表示
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-10-27 DOI: 10.1142/s0219024921500370
E. Lépinette, Duc Thinh Vu
{"title":"Coherent Risk Measure on L0: NA Condition, Pricing and Dual Representation","authors":"E. Lépinette, Duc Thinh Vu","doi":"10.1142/s0219024921500370","DOIUrl":"https://doi.org/10.1142/s0219024921500370","url":null,"abstract":"","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-10-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47224029","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
LARGE PLATONIC MARKETS WITH DELAYS 有延迟的大型柏拉图式市场
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-10-26 DOI: 10.1142/s0219024921500436
Yannick Limmer, T. Meyer-Brandis
{"title":"LARGE PLATONIC MARKETS WITH DELAYS","authors":"Yannick Limmer, T. Meyer-Brandis","doi":"10.1142/s0219024921500436","DOIUrl":"https://doi.org/10.1142/s0219024921500436","url":null,"abstract":"The objective is to develop a general stochastic approach to delays on financial markets. We suggest such a concept in the context of large Platonic markets, which allow infinitely many assets and incorporate a restricted information setting. The discussion is divided into information delays and order execution delays. The former enables modeling of markets, where the observed information is delayed, while the latter provides the opportunity to defer the indexed time of a received asset price. Both delays may be designed randomly and inhomogeneously over time. We show that delayed markets are equipped with a fundamental theorem of asset pricing and our main result is inheritance of the no asymptotic Lp-free lunch condition under both delay types. Eventually, we suggest an approach to verify absence of Lp-free lunch on markets with multiple brokers endowed with deviating trading speeds.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-10-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44805188","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
DYNAMIC PROBABILISTIC FORECASTING WITH UNCERTAINTY 具有不确定性的动态概率预测
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-10-23 DOI: 10.1142/s0219024921500345
FRED ESPEN BENTH, GLEDA KUTROLLI, SILVANA STEFANI
{"title":"DYNAMIC PROBABILISTIC FORECASTING WITH UNCERTAINTY","authors":"FRED ESPEN BENTH, GLEDA KUTROLLI, SILVANA STEFANI","doi":"10.1142/s0219024921500345","DOIUrl":"https://doi.org/10.1142/s0219024921500345","url":null,"abstract":"In this paper, we introduce a dynamical model for the time evolution of probability density functions incorporating uncertainty in the parameters. The uncertainty follows stochastic processes, thereby defining a new class of stochastic processes with values in the space of probability densities. The purpose is to quantify uncertainty that can be used for probabilistic forecasting. Starting from a set of traded prices of equity indices, we do some empirical studies. We apply our dynamic probabilistic forecasting to option pricing, where our proposed notion of model uncertainty reduces to uncertainty on future volatility. A distribution of option prices follows, reflecting the uncertainty on the distribution of the underlying prices. We associate measures of model uncertainty of prices in the sense of Cont.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-10-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138532149","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
引用次数: 0
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