Stock prices are well known to exhibit behaviors that are difficult to model mathematically. Individual stocks are observed to exhibit short term price reversals and long term momentum, while their industries only exhibit momentum. Here we show that individual stocks can be modeled by simple...

In line with regulations and common risk management practice, the credit risk of a portfolio is managed via its potential future exposures (PFEs), expected exposures (EEs), and related measures, the expected positive exposure (EPE), effective expected exposure (EEE), and the effective expected...

Stock prices are well known to exhibit behaviors that are difficult to model mathematically. Individual stocks are observed to exhibit short term price reversals and long term momentum, while their industries only exhibit momentum.Here we show that individual stocks can be modeled by simple mean...

We generalize the Kelly criterion and the growth-optimal portfolio (GOP) concept beyond log-wealth maximization. We show that models of speculative price dynamics with time change require different compounding algebras leading to GOPs that do not coincide with log-wealth maximization. In...

Calibrating a trading rule using a historical simulation (also called backtest) contributes to backtest overfitting, which in turn leads to underperformance. In this paper we propose a procedure for determining the optimal trading rule (OTR) without running alternative model configurations...