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Quantitative Finance at arXiv wrote a new blog post titled Powershare Mechanics. (arXiv:1907.07975v1 [econ.GN])
This paper proposes the governance framework of a gamified social network for charity crowdfunding fueled by public computing. It introduces optimal scarce resource allocation model, technological configuration of the FIRE consensus protocol, and multi-layer incentivization structure that maximizes value creation within the network.
3 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Risk-dependent centrality in economic and financial networks. (arXiv:1907.07908v1 [q-fin.MF])
Node centrality is one of the most important and widely used concepts in the study of complex networks. Here, we extend the paradigm of node centrality in financial and economic networks to consider the changes of node "importance" produced not only by the variation of the topology of the system but also as a consequence of the external levels of risk to which the network as a whole is submitted. Starting from the "Susceptible-Infected" (SI) model of epidemics and its relation to the communicability functions of networks we develop a series of risk-dependent centralities for nodes in...
3 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Formal verification of trading in financial markets. (arXiv:1907.07885v1 [cs.LO])
We introduce a formal framework for analyzing trades in financial markets. An exchange is where multiple buyers and sellers participate to trade. These days, all big exchanges use computer algorithms that implement double sided auctions to match buy and sell requests and these algorithms must abide by certain regulatory guidelines. For example, market regulators enforce that a matching produced by exchanges should be \emph{fair}, \emph{uniform} and \emph{individual rational}. To verify these properties of trades, we first formally define these notions in a theorem prover and then give formal...
3 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Behavioural Macroeconomic Policy: New perspectives on time inconsistency. (arXiv:1907.07858v1 [econ.TH])
This paper brings together divergent approaches to time inconsistency from macroeconomic policy and behavioural economics. Behavioural discount functions from behavioural microeconomics are embedded into a game-theoretic analysis of temptation versus enforcement to construct an encompassing model, nesting combinations of time consistent and time inconsistent preferences. The analysis presented in this paper shows that, with hyperbolic/quasihyperbolic discounting, the enforceable range of inflation targets is narrowed. This suggests limits to the effectiveness of monetary targets, under...
3 hours ago
Quantitative Finance at arXiv wrote a new blog post titled Brownian bridge with random length and pinning point for modelling of financial information. (arXiv:1907.08047v1 [math.PR])
Developed countries are increasingly relying on gas storage to ensure security of supply. In this article we consider an approach to gas storage valuation in which the information about the time at which the holder of a gas storage contract should choose to inject or withdraw gas is modelled using a Brownian bridge that starts at zero and is conditioned to equal a constant x in the time of injection and a constant y in the time of withdrawal. This enables to catch some empirical facts on the behavior of gas storage markets: when the Brownian bridge process is away from the boundaries x and y,...
3 hours ago
The Practical Quant wrote a new blog post titled Acquiring and sharing high-quality data
The O'Reilly Data Show Podcast: Roger Chen on the fair value and decentralized governance of data.In this episode of the Data Show, I spoke with Roger Chen, co-founder and CEO of Computable Labs, a startup focused on building tools for the creation of data networks and data exchanges. Chen has also served as co-chair of O'Reilly's Artificial Intelligence Conference since its inception in 2016. This conversation took place the day after Chen and his collaborators released an interesting new white paper, Fair value and decentralized governance of data. Current-generation AI and...
15 hours ago
Quantitative Finance at arXiv wrote a new blog post titled The cyclicality of loan loss provisions under three different accounting models: the United Kingdom, Spain, and Brazil. (arXiv:1907.07491v1 [econ.GN])
A controversy involving loan loss provisions in banks concerns their relationship with the business cycle. While international accounting standards for recognizing provisions (incurred loss model) would presumably be pro-cyclical, accentuating the effects of the current economic cycle, an alternative model, the expected loss model, has countercyclical characteristics, acting as a buffer against economic imbalances caused by expansionary or contractionary phases in the economy. In Brazil, a mixed accounting model exists, whose behavior is not known to be pro-cyclical or countercyclical. The...
Quantitative Finance at arXiv wrote a new blog post titled Confidence Collapse in a Multi-Household, Self-Reflexive DSGE Model. (arXiv:1907.07425v1 [q-fin.GN])
We investigate a multi-household DSGE model in which past aggregate consumption impacts the confidence, and therefore consumption propensity, of individual households. We find that such a minimal setup is extremely rich, and leads to a variety of realistic output dynamics: high output with no crises; high output with increased volatility and deep, short lived recessions; alternation of high and low output states where relatively mild drop in economic conditions can lead to a temporary confidence collapse and steep decline in economic activity. The crisis probability depends exponentially...
Quantitative Finance at arXiv wrote a new blog post titled A model-free backward and forward nonlinear PDEs for implied volatility. (arXiv:1907.07305v1 [q-fin.CP])
We derive a backward and forward nonlinear PDEs that govern the implied volatility of a contingent claim whenever the latter is well-defined. This would include at least any contingent claim written on a positive stock price whose payoff at a possibly random time is convex. We also discuss suitable initial and boundary conditions for those PDEs. Finally, we demonstrate how to solve them numerically by using an iterative finite-difference approach.
Quantitative Finance at arXiv wrote a new blog post titled Gaussian Process Regression for Pricing Variable Annuities with Stochastic Volatility and Interest Rate. (arXiv:1903.00369v2 [q-fin.CP] UPDATED)
In this paper we investigate price and Greeks computation of a Guaranteed Minimum Withdrawal Benefit (GMWB) Variable Annuity (VA) when both stochastic volatility and stochastic interest rate are considered together in the Heston Hull-White model. Specifically, we employ an improved version of the Hybrid Tree-PDE (HPDE) approach introduced by Briani et al.. Such a numerical method turns out to be particularly suitable to handle the long maturity of GMWB products and to solve the dynamic control problem due to computing the optimal withdrawal strategy. Then, in order to speed up the...
Quantitative Finance at arXiv wrote a new blog post titled Self Organizing Supply Chains for Micro-Prediction: Present and Future uses of the ROAR Protocol. (arXiv:1907.07514v1 [stat.AP])
A multi-agent system is trialed as a means of crowd-sourcing inexpensive but high quality streams of predictions. Each agent is a microservice embodying statistical models and endowed with economic self-interest. The ability to fork and modify simple agents is granted to a large number of employees in a firm and empirical lessons are reported. We suggest that one plausible trajectory for this project is the creation of a Prediction Web.
The Reformed Broker wrote a new blog post titled Clips From Today’s Closing Bell
... The post Clips From Today’s Closing Bell appeared first on The Reformed Broker.
The Practical Quant wrote a new blog post titled You'll want Nexar's newly released Live Map for your city
Extracting and exposing valuable insights to enable smart cities and many other applications.I recently had the privilege of getting a preview of Nexar's Live Map, from my friend, Nexar's CTO and co-founder Bruno Fernandez-Ruiz. Nexar uses off-the-shelf smartphones and dash-cams, sophisticated data ingestion, data processing, sensor fusion, and machine learning software to realize their vision of creating the largest safe driving network. To date the company has recorded many miles of driving video ("100 million miles, and more than 10 million miles every month"). This means the company now...
2 days ago