The latest global financial tsunami and its follow-up global economic recession has uncovered the crucial impact of housing markets on financial and economic systems. The Chinese stock market experienced a markedly fall during the global financial tsunami and China's economy has also slowed down...

We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their admixture to a portfolio of stocks provides a more reliable hedge against dramatic price drops than the use of options whose prices were fixed by the...

In this work, we develop a novel principal component analysis (PCA) for semimartingales by introducing a suitable spectral analysis for the quadratic variation operator. Motivated by high-dimensional complex systems typically found in interest rate markets, we investigate correlation in...

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...

We study a risk sensitive control version of the lifetime ruin probability problem. We consider a sequence of investments problems in Black-Scholes market that includes a risky asset and a riskless asset. We present a differential game that governs the limit behavior. We solve it explicitly and...

We carry out a large-scale empirical data analysis to examine the efficiency of the so-called pairs trading. On the basis of relevant three thresholds, namely, starting, profit-taking, and stop-loss for the `first-passage process' of the spread (gap) between two highly-correlated stocks, we...

We study a hybrid tree-finite difference method which permits to obtain efficient and accurate European and American option prices in the Heston Hull-White and Heston Hull-White2d models. Moreover, as a by-product, we provide a new simulation scheme to be used for Monte Carlo evaluations....

A classification of companies into sectors of the economy is important for macroeconomic analysis and for investments into the sector-specific financial indices and exchange traded funds (ETFs). Major industrial classification systems and financial indices have historically been based on expert...

In quantitative finance, we often model asset prices as semimartingales, with drift, diffusion and jump components. The jump activity index measures the strength of the jumps at high frequencies, and is of interest both in model selection and fitting, and in volatility estimation. In this paper,...

We consider extensive data on Spanish international trades and population composition and, through statistical-mechanics and graph-theory driven analysis, we unveil that the social network made of native and foreign-born individuals plays a role in the evolution and in the diversification of...