Search results for "Quantitative Finance - Computational Finance"
showing 4 items of 4 documents
The role of information in a two-traders market
2014
In a very simple stock market, made by only two \emph{initially equivalent} traders, we discuss how the information can affect the performance of the traders. More in detail, we first consider how the portfolios of the traders evolve in time when the market is \emph{closed}. After that, we discuss two models in which an interaction with the outer world is allowed. We show that, in this case, the two traders behave differently, depending on \textbf{i)} the amount of information which they receive from outside; and \textbf{ii)}the quality of this information.
Multivariate GARCH estimation via a Bregman-proximal trust-region method
2011
The estimation of multivariate GARCH time series models is a difficult task mainly due to the significant overparameterization exhibited by the problem and usually referred to as the "curse of dimensionality". For example, in the case of the VEC family, the number of parameters involved in the model grows as a polynomial of order four on the dimensionality of the problem. Moreover, these parameters are subjected to convoluted nonlinear constraints necessary to ensure, for instance, the existence of stationary solutions and the positive semidefinite character of the conditional covariance matrices used in the model design. So far, this problem has been addressed in the literature only in low…
Reduced Order Models for Pricing European and American Options under Stochastic Volatility and Jump-Diffusion Models
2016
European options can be priced by solving parabolic partial(-integro) differential equations under stochastic volatility and jump-diffusion models like the Heston, Merton, and Bates models. American option prices can be obtained by solving linear complementary problems (LCPs) with the same operators. A finite difference discretization leads to a so-called full order model (FOM). Reduced order models (ROMs) are derived employing proper orthogonal decomposition (POD). The early exercise constraint of American options is enforced by a penalty on subset of grid points. The presented numerical experiments demonstrate that pricing with ROMs can be orders of magnitude faster within a given model p…
Coupling News Sentiment with Web Browsing Data Improves Prediction of Intra-Day Price Dynamics
2015
The new digital revolution of big data is deeply changing our capability of understanding society and forecasting the outcome of many social and economic systems. Unfortunately, information can be very heterogeneous in the importance, relevance, and surprise it conveys, affecting severely the predictive power of semantic and statistical methods. Here we show that the aggregation of web users' behavior can be elicited to overcome this problem in a hard to predict complex system, namely the financial market. Specifically, our in-sample analysis shows that the combined use of sentiment analysis of news and browsing activity of users of Yahoo! Finance greatly helps forecasting intra-day and dai…