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Construct DeFi yield curve

I was wondering if anyone knows how to construct a yield curve for cryptocurrencies (for yTokens like yDAI and yETH for example). It'd be best if yield curves could be dynamic (though I think it could ...
Jenn Gunawan's user avatar
1 vote
0 answers
85 views

Interpreting parameters on Matlab from Patons code on time varying copulas

I ran Andrew pattons code(2006) for Markov switching time varying copulas with an example code given in the Matlab tool box. This is the equation for Markov switching time varying normal copulas I ...
nadeem's user avatar
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3 votes
0 answers
139 views

Why is the dynamic mean-variance problem time-inconsistent?

A lot of the literature in dynamic mean-variance problem states that the dynamic mean-variance problem is time-inconsistent. Now I was not able to find an example of why the problem is time ...
phdstudent's user avatar
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2 votes
0 answers
117 views

Dynamic portfolio optimization with cumulative prospect theory

i'm new to this forum and i hope i can get some help or at least some guidance how to tackle the following problem: I'm tasked to write a VBA Macro that conducts an intertemporal portfolio ...
BussiHasi's user avatar
1 vote
0 answers
584 views

Markov Switching Vector Autoregressive (MSVAR) and Markov Switching Dynamic Stochastic General Equilibrium (MSDSGE) Models

I want to reproduce the results of Bianchi et al (2017) Escaping the Great Recession using R and/or Python. Authors in the ...
MYaseen208's user avatar
1 vote
1 answer
151 views

Are there stocks dynamic that cannot be represented by Generalized Black Scholes model?

The generalized Black Scholes Model refers to a stock dynamic that satisfy $$ dS(t)=S(t)(\mu_t dt+ \sigma_t dW(t)) $$ By martingale representation theorem, it seems that if there is a risk neutral ...
Preston Lui's user avatar
1 vote
1 answer
202 views

Trading 3 stocks X Y Z where X cointegrated to Y, Y to Z, but no other cointegration is available

Suppose you have 3 stocks, say X Y Z. You also know that X is cointegrated to Y using some test (say ADF) and Y is cointegrated to Z. However, no transitivity, and no threesome cointegration ...
Mirco A. Mannucci's user avatar
3 votes
0 answers
128 views

Inverse Problems in Finance

Are there any canonical references for inverse problems in finance? For example, if I have a measure that evolves with Fokker-Planck dynamics, are there standard approaches used by the community to ...
vrume21's user avatar
  • 169
2 votes
1 answer
272 views

Dynamical Behavior of Hurst Exponent

I feel that the dynamic of financial market is not really modeled by standard Brownian motion, but fractional Brownian motion or even multifractional Brownian motion. I have read some references on ...
misakaczy's user avatar
1 vote
0 answers
94 views

Value function does not converge when applying the general value iteration adaptive dynamic programming [closed]

Recently,I am trying to control a marco traffic system with the general value iteration adaptive dynamic programming algorithm.However,the results do not reach my expectation. Here is the pseudo code:...
zhma's user avatar
  • 11
3 votes
0 answers
252 views

Sharpe ratio for dynamic portfolio

I want to test the performance of my strategy with different rebalancing period. I'm struggle with calculating the overall performance on backtest results and making final conclusions. For example, ...
dand1's user avatar
  • 41
1 vote
1 answer
476 views

Dynamics of LIBOR foward rate under T-forward measure

Assume that under the physical measure $\mathbb{P}$ we have for the LIBOR forward rate $L(t):=L(t;S,T) = \frac{1}{T-S}\left(\frac{P(t,S)}{P(t,T)}-1\right)$ that $$ \mathrm{d}L(t) = L(t)\left(\mu(t)\...
lbf_1994's user avatar
  • 383
1 vote
0 answers
39 views

Dynamic counterpart for model tunneling/optimization using past data

When we tune a model to optimize parameters for a strategy using past data, even if controlling for overfitting (checking out of sample performance) and refreshing the analysis from time to time, we ...
LuaLua's user avatar
  • 13
3 votes
1 answer
234 views

Why is this utility function not picking up its penalty?

I was reading this seminal paper by Infanger. On page 40, Figure 11. was quite interesting. In particular I was interested in the top one, 19 Years and I wanted to reproduce this plot. To give some ...
math's user avatar
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5 votes
1 answer
676 views

How to (efficiently) calculate the maximum possible return of a perfect "crystal ball" investment strategy?

I am new to the world of investing, so please excuse the clumsy wording of the question... there is probably a better term for what I am looking for or maybe this is even a known/classic problem. If ...
KlaasNotFound's user avatar
0 votes
1 answer
2k views

How to estimate an Engle's asymmetric DCC model in R?

I have a $N x d$ matrix of standardized residuals, and I want to estimate the parameters $\alpha$, $\beta$ and $\gamma$ of the asymmetric version (Cappiello, Engle, Sheppard, 2006) of the usual ...
Kondo's user avatar
  • 449
1 vote
0 answers
309 views

How to write time-varying functions in R? Applied example

Let's say I want to use a Gaussian copula $$C_{R_t}(\eta_1, ..., \eta_n) = N_{R_t}(N^{-1}(\eta_1), ...,N^{-1}(\eta_n))$$ with a time-varying correlation matrix $R_t$. Through DCC we model the ...
Kondo's user avatar
  • 449
1 vote
0 answers
58 views

Dynamic programming problem with dimension over 1000.

I am working on a dynamic programming problem with dimension over 1000. In this past, there exist methods like Smolyak algorithm and Adaptive sparse grid method to solve dynamic programming problem ...
sincostancot's user avatar
4 votes
0 answers
266 views

How would it be possible to use Dynamic Programming to search a space of investment strategies to find an optimum?

As my question states, the problem I am having is finding a sensible way to search a large space. Any help or insight that could be provided would be hugely appreciated. Currently I am trying to ...
ahair's user avatar
  • 71
1 vote
0 answers
31 views

Is there any theoretical work to find an optimum size for the size of horizon in finite-horizon optimization or control?

we learn a lot about finite and infinite horizon control in dynamic programming. but I was wondering if we want to minimize the cost per time(discrete time) is there any work to find the optimum size ...
Amir's user avatar
  • 111
23 votes
2 answers
12k views

Why dynamics of local volatility is wrong?

In Dupire's local volatility model, the volatility is is a deterministic function of the underlying price and time, chosen to match observed European option prices. To be more specific, given a ...
cmd1991's user avatar
  • 533
3 votes
0 answers
814 views

How can I do a dynamic GARCH model using extended Kalman filter in R?

Today I was reading an article quoted here, in this article is proposed an adaptive (dynamic) Garch model. How can I do it in R? The use of extended Kalman filter or particle filter is indifferent. I ...
Mik_79's user avatar
  • 31
4 votes
1 answer
806 views

Do you have a good application example of Approximate Dynamic Programming?

Have you ever tackled a finance problem with Approximate Dynamic Programming? I have only used dynamic programming for simple examples like a optimal extraction in mining. Do you have canonical ...
donpresente's user avatar
1 vote
1 answer
284 views

Simulate from time-dependent copula in MatLab using COPULARND

I would like to simulate from a t-copula with time-dependent correlation matrices. Say I have a series of 2000 correlation matrices (obtained from a copula-DCC model for data consisting of 2000 ...
user138776's user avatar
3 votes
1 answer
3k views

Non-linear Dynamical Systems and Quantitave Finance

The vast majority of what I have read about quantitave finance is to do with option pricing and time series analysis for forecasting. However the economy as a whole behaves as a dynamic system with ...
rwolst's user avatar
  • 327
5 votes
0 answers
208 views

Dividend Index Futures

My question is dealing with the proportionality between Dividend Index Futures prices and Index prices. Indeed, we in the past we used to do a simple regression between these variables and use the ...
aajajim's user avatar
  • 663
2 votes
2 answers
187 views

Pricing Assets in the S&P Dynamic Asset Exchange

I am attempting to recreate the S&P Dynamic Asset Exchange using the methodology outlined in this paper. I am struggling to 'normalize' the prices of the assets properly. On page 6 of the ...
user2188190's user avatar