We characterize policy interventions directed to minimize the cost to the deposit guarantee scheme and the taxpayers of banks with legacy problems. Non-performing loans (NPLs) with low and risky returns create a debt overhang that induces bank owners to forego profitable lending opportunities....

This paper introduces a formulation of the optimal network compression problem for financial systems. This general formulation is presented for different levels of network compression or rerouting allowed from the initial inter-bank network. We prove that this problem is, generically, NP-hard....

We characterize policy interventions directed to minimize the cost to the deposit guarantee scheme and the taxpayers of banks with legacy problems. Non-performing loans (NPLs) with low and risky returns create a debt overhang that induces bank owners to forego profitable lending opportunities....

Proceeding to portfolio allocation in the framework of Markowitz, a numerical inconsistency may occur when the sample covariance matrix of assets returns has to be inverted. This is mainly caused by the magnitude of its lowest eigenvalues. In this paper, we tackle the Markowitz problem as an...

Portfolio implementation is an essential part of active investment strategies. The trading horizon-the length of time allocated for trade implementation, is an important consideration in portfolio trading. Previous research on optimal trading limits the trading horizon as a fixed value. In this...

The purpose of these notes is to provide a systematic quantitative framework - in what is intended to be a "pedagogical" fashion - for discussing mean-reversion and optimization. We start with pair trading and add complexity by following the sequence "mean-reversion via demeaning → regression...

In these notes we discuss investment allocation to multiple alpha streams traded on the same execution platform, including when trades are crossed internally resulting in turnover reduction. We discuss approaches to alpha weight optimization where one maximizes P&L subject to bounds on...