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The Reformed Broker wrote a new blog post titled How I invest my own money
What Josh does with his own savings. ... The post How I invest my own money appeared first on The Reformed Broker.
3 hours ago
All About Alpha wrote a new blog post titled Tick Size and High-Frequency Trading
A lot of hopes have been placed on changes in market tick sizes. In the 1990s there was a big push to reduce the tick sizes of securities, allowing them to get down to one cent or fractions thereof. In the new millennium came a sense of regret. Observers suspectedRead More
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Multi-Level Order-Flow Imbalance in a Limit Order Book. (arXiv:1907.06230v1 [q-fin.TR])
We study the \emph{multi-level order-flow imbalance (MLOFI)}, which measures the net flow of buy and sell orders at different price levels in a limit order book (LOB). Using a recent, high-quality data set for 6 liquid stocks on Nasdaq, we use Ridge regression to fit a simple, linear relationship between MLOFI and the contemporaneous change in mid-price. For all 6 stocks that we study, we find that the goodness-of-fit of the relationship improves with each additional price level that we include in the MLOFI vector. Our results underline how the complex order-flow activity deep into the LOB...
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled From quadratic Hawkes processes to super-Heston rough volatility models with Zumbach effect. (arXiv:1907.06151v1 [q-fin.ST])
Using microscopic price models based on Hawkes processes, it has been shown that under some no-arbitrage condition, the high degree of endogeneity of markets together with the phenomenon of metaorders splitting generate rough Heston-type volatility at the macroscopic scale. One additional important feature of financial dynamics, at the heart of several influential works in econophysics, is the so-called feedback or Zumbach effect. This essentially means that past trends in returns convey significant information on future volatility. A natural way to reproduce this property in microstructure...
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Online Rental Housing Market Representation and the Digital Reproduction of Urban Inequality. (arXiv:1907.06118v1 [econ.GN])
As the rental housing market moves online, the Internet offers divergent possible futures: either the promise of more-equal access to information for previously marginalized homeseekers, or a reproduction of longstanding information inequalities. Biases in online listings' representativeness could impact different communities' access to housing search information, reinforcing traditional information segregation patterns through a digital divide. They could also circumscribe housing practitioners' and researchers' ability to draw broad market insights from listings to understand rental supply...
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled A simulation of the insurance industry: The problem of risk model homogeneity. (arXiv:1907.05954v1 [econ.GN])
We develop an agent-based simulation of the catastrophe insurance and reinsurance industry and use it to study the problem of risk model homogeneity. The model simulates the balance sheets of insurance firms, who collect premiums from clients in return for ensuring them against intermittent, heavy-tailed risks. Firms manage their capital and pay dividends to their investors, and use either reinsurance contracts or cat bonds to hedge their tail risk. The model generates plausible time series of profits and losses and recovers stylized facts, such as the insurance cycle and the emergence of...
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Risk Management with Tail Quasi-Linear Means. (arXiv:1902.06941v2 [q-fin.RM] UPDATED)
We generalize Quasi-Linear Means by restricting to the tail of the risk distribution and show that this can be a useful quantity in risk management since it comprises in its general form the Value at Risk, the Tail Value at Risk and the Entropic Risk Measure in a unified way. We then investigate the fundamental properties of the proposed measure and show its unique features and implications in the risk measurement process. Furthermore, we derive formulas for truncated elliptical models of losses and provide formulas for selected members of such models.
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Neural network regression for Bermudan option pricing. (arXiv:1907.06474v1 [math.PR])
The pricing of Bermudan options amounts to solving a dynamic programming principle , in which the main difficulty, especially in large dimension, comes from the computation of the conditional expectation involved in the continuation value. These conditional expectations are classically computed by regression techniques on a finite dimensional vector space. In this work, we study neural networks approximation of conditional expectations. We prove the convergence of the well-known Longstaff and Schwartz algorithm when the standard least-square regression is replaced by a neural network...
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Confidentiality and linked data. (arXiv:1907.06465v1 [cs.CR])
Data providers such as government statistical agencies perform a balancing act: maximising information published to inform decision-making and research, while simultaneously protecting privacy. The emergence of identified administrative datasets with the potential for sharing (and thus linking) offers huge potential benefits but significant additional risks. This article introduces the principles and methods of linking data across different sources and points in time, focusing on potential areas of risk. We then consider confidentiality risk, focusing in particular on the "intruder" problem...
15 hours ago
The Reformed Broker wrote a new blog post titled Clips From Today’s Halftime Report
Reports: Charles Schwab in talks to buy USAA Wealth Management from CNBC. How much higher can Amazon go? Should you buy Slack? #AskHalftime from CNBC. Final trades: Gilead, Crown Castle, Charles Schwab, American Express & Healthcare from CNBC. Full interview with Scott Minerd from CNBC.... The post Clips From Today’s Halftime Report appeared first on The Reformed Broker.
19 hours ago
All About Alpha wrote a new blog post titled The Audacity of Opacity
By Bill Kelly, CEO, CAIA Association Why are we still talking about this? No, it’s not the central bankers and their insatiable easing tendencies, trade wars with China, or even the Women’s World Cup football match (sorry Netherlands!). These stories all make great headlines, drive news ratings, generate tickertape parades,Read More
yesterday
The Reformed Broker wrote a new blog post titled Everyone Deserves Good Financial Advice. Everyone.
Liftoff is a collaboration between Ritholtz Wealth Management and Betterment... The post Everyone Deserves Good Financial Advice. Everyone. appeared first on The Reformed Broker.
yesterday
The Practical Quant wrote a new blog post titled Managing machine learning in the enterprise: Lessons from banking and health care
A look at how guidelines from regulated industries can help shape your ML strategy.By Ben Lorica, Harish Doddi, David Talby.As companies use machine learning (ML) and AI technologies across a broader suite of products and services, it’s clear that new tools, best practices, and new organizational structures will be needed. In recent posts, we described requisite foundational technologies needed to sustain machine learning practices within organizations, and specialized tools for model development, model governance, and model operations/testing/monitoring.What cultural and organizational...
yesterday
Quantitative Finance at arXiv wrote a new blog post titled From small markets to big markets. (arXiv:1907.05593v1 [q-fin.PM])
We study the most famous example of a large financial market: the Arbitrage Pricing Model, where investors can trade in a one-period setting with countably many assets admitting a factor structure. We consider the problem of maximising expected utility in this setting. Besides establishing the existence of optimizers under weaker assumptions than previous papers, we go on studying the relationship between optimal investments in finite market segments and those in the whole market. We show that certain natural (but nontrivial) continuity rules hold: maximal satisfaction, reservation prices and...
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled Singularities and Catastrophes in Economics: Historical Perspectives and Future Directions. (arXiv:1907.05582v1 [econ.GN])
Economic theory is a mathematically rich field in which there are opportunities for the formal analysis of singularities and catastrophes. This article looks at the historical context of singularities through the work of two eminent Frenchmen around the late 1960s and 1970s. Ren\'e Thom (1923-2002) was an acclaimed mathematician having received the Fields Medal in 1958, whereas G\'erard Debreu (1921-2004) would receive the Nobel Prize in economics in 1983. Both were highly influential within their fields and given the fundamental nature of their work, the potential for cross-fertilisation...
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled Dreaming machine learning: Lipschitz extensions for reinforcement learning on financial markets. (arXiv:1907.05697v1 [q-fin.ST])
We develop a new topological structure for the construction of a reinforcement learning model in the framework of financial markets. It is based on Lipschitz type extension of reward functions defined in metric spaces. Using some known states of a dynamical system that represents the evolution of a financial market, we use our technique to simulate new states, that we call ``dreams". These new states are used to feed a learning algorithm designed to improve the investment strategy.
2 days ago
Quantitative Finance at arXiv wrote a new blog post titled Gittins' theorem under uncertainty. (arXiv:1907.05689v1 [math.OC])
We study dynamic allocation problems for discrete time multi-armed bandits under uncertainty, based on the the theory of nonlinear expectations. We show that, under strong independence of the bandits and with some relaxation in the definition of optimality, a Gittins allocation index gives optimal choices. This involves studying the interaction of our uncertainty with controls which determine the filtration. We also run a simple numerical example which illustrates the interaction between the willingness to explore and uncertainty aversion of the agent when making decisions.
2 days ago