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International Journal of Theoretical and Applied Finance最新文献

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Rating Transitions Forecasting: A filtering Approach 评级转换预测:一种过滤方法
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-09-22 DOI: 10.1142/s0219024923500097
Areski Cousin, J. Lelong, Tom Picard
{"title":"Rating Transitions Forecasting: A filtering Approach","authors":"Areski Cousin, J. Lelong, Tom Picard","doi":"10.1142/s0219024923500097","DOIUrl":"https://doi.org/10.1142/s0219024923500097","url":null,"abstract":"Analyzing the effect of business cycle on rating transitions has been a subject of great interest these last fifteen years, particularly due to the increasing pressure coming from regulators for stress testing. In this paper, we consider that the dynamics of rating migrations is governed by an unobserved latent factor. Under a point process filtering framework, we explain how the current state of the hidden factor can be efficiently inferred from observations of rating histories. We then adapt the classical Baum-Welsh algorithm to our setting and show how to estimate the latent factor parameters. Once calibrated, we may reveal and detect economic changes affecting the dynamics of rating migration, in real-time. To this end we adapt a filtering formula which can then be used for predicting future transition probabilities according to economic regimes without using any external covariates. We propose two filtering frameworks: a discrete and a continuous version. We demonstrate and compare the efficiency of both approaches on fictive data and on a corporate credit rating database. The methods could also be applied to retail credit loans.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41434014","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 Mean-Field Extension of the LIBOR Market Model LIBOR市场模型的平均场推广
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-09-22 DOI: 10.1142/S0219024922500054
Sascha Desmettre, Simon Hochgerner, Sanela Omerovic, S. Thonhauser
{"title":"A Mean-Field Extension of the LIBOR Market Model","authors":"Sascha Desmettre, Simon Hochgerner, Sanela Omerovic, S. Thonhauser","doi":"10.1142/S0219024922500054","DOIUrl":"https://doi.org/10.1142/S0219024922500054","url":null,"abstract":"We introduce a mean-field extension of the LIBOR market model (LMM) which preserves the basic features of the original model. Among others, these features are the martingale property, a directly implementable calibration and an economically reasonable parametrization of the classical LMM. At the same time, the mean-field LIBOR market model (MF-LMM) is designed to reduce the probability of exploding scenarios, arising in particular in the market-consistent valuation of long-term guarantees. To this end, we prove existence and uniqueness of the corresponding MF-LMM and investigate its practical aspects, including a Black '76-type formula. Moreover, we present an extensive numerical analysis of the MF-LMM. The corresponding Monte Carlo method is based on a suitable interacting particle system which approximates the underlying mean-field equation.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"43185048","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
THE AFFINE RATIONAL POTENTIAL MODEL 仿射有理势模型
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-09-17 DOI: 10.1142/s021902492150031x
THE ANH NGUYEN, FRANK THOMAS SEIFRIED
{"title":"THE AFFINE RATIONAL POTENTIAL MODEL","authors":"THE ANH NGUYEN, FRANK THOMAS SEIFRIED","doi":"10.1142/s021902492150031x","DOIUrl":"https://doi.org/10.1142/s021902492150031x","url":null,"abstract":"We develop a class of rational term structure models in the framework of the potential approach based upon a family of positive supermartingales that are driven by an affine Markov process. These models generally feature nonnegative interest rates and analytic pricing formulae for zero bonds, caps, swaptions, and European currency options, even in the presence of multiple factors. Moreover, in a model specification, the short rate stays near the zero lower bound for an extended period.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-09-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138532134","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
Local Risk Minimization of Contingent Claims Simultaneously Exposed to Endogenous and Exogenous Default Times 同时暴露于内生和外生违约时间的或有债权的局部风险最小化
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-09-10 DOI: 10.1142/s0219024921500333
Ramin Okhrati, Nikolaos Karpathopoulos
{"title":"Local Risk Minimization of Contingent Claims Simultaneously Exposed to Endogenous and Exogenous Default Times","authors":"Ramin Okhrati, Nikolaos Karpathopoulos","doi":"10.1142/s0219024921500333","DOIUrl":"https://doi.org/10.1142/s0219024921500333","url":null,"abstract":"We study the local risk minimization approach for contingent claims that might be simultaneously prone to both endogenous (or structural) and exogenous (or reduced form) default events. The exogenous default time is defined through a hazard rate process that can depend on both the underlying risky asset values and its running infimum process. On the other hand, the endogenous default time could be modeled by a first-passage-time approach. In particular, our framework provides a unification of structural and reduced form credit risk modeling. In our work, the evolution of the underlying risky asset values is modeled by an exponential Lévy process, for example exponential jump-diffusion models. Our aim is to determine locally risk minimizing hedging strategies of the contingent claims that are affected by both structural and reduced form default events, through solutions of either partial differential equations or partial-integro differential equations. Finally, we show that these solutions are numerically implementable, and we provide some numerical examples.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45766409","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
OPTION IMPLIED VIX, SKEW AND KURTOSIS TERM STRUCTURES 期权暗示了波动率、偏度和峰度期限结构
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-09-04 DOI: 10.1142/s0219024921500308
DILIP B. MADAN, KING WANG
{"title":"OPTION IMPLIED VIX, SKEW AND KURTOSIS TERM STRUCTURES","authors":"DILIP B. MADAN, KING WANG","doi":"10.1142/s0219024921500308","DOIUrl":"https://doi.org/10.1142/s0219024921500308","url":null,"abstract":"Comparisons are made of the Chicago Board of Options Exchange (CBOE) skew index with those derived from parametric skews of bilateral gamma models and from the differentiation of option implied characteristic exponents. Discrepancies can be due to strike discretization in evaluating prices of powered returns. The remedy suggested employs a finer and wider set of strikes obtaining additional option prices by interpolation and extrapolation of implied volatilities. Procedures of replicating powered return claims are applied to the fourth power and the derivation of kurtosis term structures. Regressions of log skewness and log excess kurtosis on log maturity confirm the positivity of decay in these higher moments. The decay rates are below those required by processes of independent and identically distributed increments.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138532148","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
OPTIMAL DYNAMIC FUTURES PORTFOLIO UNDER A MULTIFACTOR GAUSSIAN FRAMEWORK 多因素高斯框架下的最优动态期货投资组合
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-08-28 DOI: 10.1142/s021902492150028x
TIM LEUNG, RAPHAEL YAN, YANG ZHOU
{"title":"OPTIMAL DYNAMIC FUTURES PORTFOLIO UNDER A MULTIFACTOR GAUSSIAN FRAMEWORK","authors":"TIM LEUNG, RAPHAEL YAN, YANG ZHOU","doi":"10.1142/s021902492150028x","DOIUrl":"https://doi.org/10.1142/s021902492150028x","url":null,"abstract":"We study the problem of dynamically trading futures in continuous time under a multifactor Gaussian framework. We present a utility maximization approach to determine the optimal futures trading strategy. This leads to the explicit solution to the Hamilton–Jacobi–Bellman (HJB) equations. We apply our stochastic framework to two-factor models, namely, the Schwartz model and Central Tendency Ornstein–Uhlenbeck (CTOU) model. We also develop a multiscale CTOU model, which has a fast mean-reverting and a slow mean-reverting factor in the spot asset price dynamics. Numerical examples are provided to illustrate the investor’s optimal positions for different futures portfolios.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-08-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"138532154","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
DISCRETE-TIME OPTIMAL EXECUTION UNDER A GENERALIZED PRICE IMPACT MODEL WITH MARKOVIAN EXOGENOUS ORDERS 具有马尔可夫外生订单的广义价格影响模型下离散时间最优执行
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-08-06 DOI: 10.1142/S0219024921500254
M. Fukasawa, M. Ohnishi, Makoto Shimoshimizu
{"title":"DISCRETE-TIME OPTIMAL EXECUTION UNDER A GENERALIZED PRICE IMPACT MODEL WITH MARKOVIAN EXOGENOUS ORDERS","authors":"M. Fukasawa, M. Ohnishi, Makoto Shimoshimizu","doi":"10.1142/S0219024921500254","DOIUrl":"https://doi.org/10.1142/S0219024921500254","url":null,"abstract":"This paper examines a discrete-time optimal trade execution problem with generalized price impact. We extend a model recently discussed, which considers price impacts of aggregate random trade orders posed by small traders as well as a large trader. In contrast that assumes aggregate trading volumes submitted by small traders are serially independent, this paper allows a Markovian dependence. \u0000 \u0000Our new problem is formulated as a Markov decision process with state variables including the last small traders' aggregate orders. Over a finite horizon, the large trader with Constant Absolute Risk Aversion (CARA) von Neumann-Morgenstern (vN-M) utility function maximizes the expected utility from the final wealth. By applying the backward induction method of dynamic programming, we characterize the optimal value function and optimal trade execution strategy, and conclude that the execution strategy is a time-dependent affine function of three state variables. Moreover, numerical analysis prevails that the optimal execution strategy admits a `statistical arbitrage' via a round-trip trading, although our model considers a linear permanent price impact, which does not admit any price manipulation or arbitrage. The reason is that our model considers price impacts caused by small traders' orders with a Markovian dependence.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41960418","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
PRACTICAL INVESTMENT CONSEQUENCES OF THE SCALARIZATION PARAMETER FORMULATION IN DYNAMIC MEAN–VARIANCE PORTFOLIO OPTIMIZATION 动态均方差投资组合优化中标量化参数公式的实际投资结果
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-08-01 DOI: 10.1142/s0219024921500291
Pieter M. van Staden, D. Dang, P. Forsyth
{"title":"PRACTICAL INVESTMENT CONSEQUENCES OF THE SCALARIZATION PARAMETER FORMULATION IN DYNAMIC MEAN–VARIANCE PORTFOLIO OPTIMIZATION","authors":"Pieter M. van Staden, D. Dang, P. Forsyth","doi":"10.1142/s0219024921500291","DOIUrl":"https://doi.org/10.1142/s0219024921500291","url":null,"abstract":"We consider the practical investment consequences of implementing the two most popular formulations of the scalarization (or risk-aversion) parameter in the time-consistent dynamic mean–variance (MV) portfolio optimization problem. Specifically, we compare results using a scalarization parameter assumed to be (i) constant and (ii) inversely proportional to the investor’s wealth. Since the link between the scalarization parameter formulation and risk preferences is known to be nontrivial (even in the case where a constant scalarization parameter is used), the comparison is viewed from the perspective of an investor who is otherwise agnostic regarding the philosophical motivations underlying the different formulations and their relation to theoretical risk-aversion considerations, and instead simply wishes to compare investment outcomes of the different strategies. In order to consider the investment problem in a realistic setting, we extend some known results to allow for the case where the risky asset follows a jump-diffusion process, and examine multiple sets of plausible investment constraints that are applied simultaneously. We show that the investment strategies obtained using a scalarization parameter that is inversely proportional to wealth, which enjoys widespread popularity in the literature applying MV optimization in institutional settings, can exhibit some undesirable and impractical characteristics.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47128317","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: 2
COMPARING THE SMALL-SAMPLE ESTIMATION ERROR OF CONCEPTUALLY DIFFERENT RISK MEASURES 比较概念上不同风险度量的小样本估计误差
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-07-22 DOI: 10.1142/S0219024921500242
B. Auer, Frank Schuhmacher
{"title":"COMPARING THE SMALL-SAMPLE ESTIMATION ERROR OF CONCEPTUALLY DIFFERENT RISK MEASURES","authors":"B. Auer, Frank Schuhmacher","doi":"10.1142/S0219024921500242","DOIUrl":"https://doi.org/10.1142/S0219024921500242","url":null,"abstract":"Motivated by the need to correctly rank risky alternatives in many investment, insurance and operations research applications, this paper uses a generalized location and scale framework from utility theory to propose a simple but powerful metric for comparing the estimation error of conceptually different risk measures. In an illustrative application, we obtain this metric — the probability that a risk measure ranks two assets falsely in finite samples — via Monte Carlo simulation for fourteen popular measures of risk and different distributional settings. Its results allow us to highlight interesting risk measure properties such as their relative quality under varying degrees of skewness and kurtosis. Because of the generality of our approach, the error probabilities derived for classic risk measures can serve as a benchmark for newly proposed measures seeking to replace the classic ones in decision making. It also supports the identification of the most suitable risk measures for a given distributional environment.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-07-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"64327292","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
Martingale representations in progressive enlargement by multivariate point processes 多元点过程渐进放大中的鞅表示
IF 0.5
International Journal of Theoretical and Applied Finance Pub Date : 2021-07-08 DOI: 10.1142/s0219024922500157
A. Calzolari, B. Torti
{"title":"Martingale representations in progressive enlargement by multivariate point processes","authors":"A. Calzolari, B. Torti","doi":"10.1142/s0219024922500157","DOIUrl":"https://doi.org/10.1142/s0219024922500157","url":null,"abstract":"We show that all local martingales with respect to the initially enlarged natural filtration of a vector of multivariate point processes can be weakly represented up to the minimum among the explosion times of the components. We also prove that a strong representation holds if any multivariate point process of the vector has almost surely infinite explosion time and discrete mark’s space. Then we provide a condition under which the components of the multidimensional local martingale driving the strong representation are pairwise orthogonal.","PeriodicalId":47022,"journal":{"name":"International Journal of Theoretical and Applied Finance","volume":null,"pages":null},"PeriodicalIF":0.5,"publicationDate":"2021-07-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"41769924","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
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