This is a summary of links featured on Quantocracy on Wednesday, 11/29/2023. To see our most recent links, visit the Quant Mashup. Read on readers!
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What is a robust stochastic volatility model research paper [Artur Sepp]I would like to share my research and thoughts about stochastic volatility models and, in particular, about the log-normal stochastic volatility model that I have been developing in a series of papers (see introductory paper with Piotr Karasinski in 2012, the extension to include quadratic drift with Parviz Rakhmonov in 2022, and application of the model to Cheyette interest rate model and to
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Commodity carry as a trading signal part 2 [SR SV]Carry on commodity futures contains information on implicit subsidies, such as convenience yields and hedging premia. Its precision as a trading signal improves when incorporating adjustments for inflation, seasonal effects, and volatility. There is strong evidence for the predictive power of various metrics of real carry with respect to subsequent future returns for a broad panel of 23
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A New Book Takes A Deep Dive At Solving The Portfolio Problem [Capital Spectator]Financial wisdom is said to be cyclical rather than cumulative, but thats unfair. At least in the dominion of portfolio management and design, academics and money managers have made great strides in decoding Mr. Markets cryptic signals over the past half century. The challenge, having led the proverbial horse to water, is making him drink. The stakes are high. History, in fact,
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Statistical Shrinkage (4) – Covariance estimation [Eran Raviv]A common issue encountered in modern statistics involves the inversion of a matrix. For example, when your data is sick with multicollinearity your estimates for the regression coefficient can bounce all over the place. In finance we use the covariance matrix as an input for portfolio construction. Analogous to the fact that variance must be positive, covariance matrix must be positive definite to