While common machine learning algorithms focus on minimizing the mean-square errors of model fit, we show that genetic programming, GP, is well-suited to maximize an economic objective, the Sharpe ratio of the usual spread portfolio in the cross-section of expected stock returns. In contrast to...

Concerns about the fragility of the financial system caused by the OTC derivatives market has encouraged the increased use of counterparty risk mitigation techniques including the use of market compression. In this process groups of market participants share position information via a third...

We consider a non-linear PDE that appears in a number of contexts including a one-way CSA, CVA with risky closeout, option pricing with differential borrowing and lending rates, accounting-consistent valuation, and constrained cash supply. We show that its solution is given as the minimum of...

Allocation between factor portfolios can bring significant advantages over traditional portfolio optimization performed among individual assets or asset classes. One such advantage is a substantial dimension reduction when one's attention turns from many assets to few factors. This, however,...

Behavioral Portfolio Management (BPM) is presented as a superior way to make investment decisions. Underlying BPM is the dynamic market interplay between Emotional Crowds and Behavioral Data Investors. BPM's first Basic Principle is that Emotional Crowds dominate the determination of both prices...

In this paper we outline the Lagrangian constrained optimization method to solve complex problems subject to constraints. Firstly we summarize the Lagrangian constrained optimization routine. Secondly we outline a detailed implementation strategy. Thirdly and finally we provide example and solve...

This study focuses on the background and relationship of asset pricing, optimal portfolios and efficient portfolio frontiers. This has been discussed in light of multiple crisis; right from the Asian Crisis of 1997, dotcom of 2001 till the financial crisis of 2008. This study tracks the changes...

LOT liquidity model, which is a kind of Tobit model with two unknown censoring points, is commonly used in the literature of microstructure of financial markets to estimate transaction costs and market liquidity from the observed return series. As far as the estimation is concerned, method based...