Top Research Papers on Quantitative Finance

This book takes the reader through a fast but structured crash-course in quantitative finance, from theory to practice, and gives a quick hands-on introduction to the pricing of financial derivatives.

Introduction Mauro Cesa (Risk Magazine) Part 1 - Derivatives Pricing 1 - Smile dynamics IV Lorenzo Bergomi (Societe Generale) 2 - Funding beyond discounting: collateral agreements and derivatives pricing Vladimir Piterbarg (Barclays Capital) 3 - Two curves, one price Marco Bianchetti (Intesa Sanpaolo Bank) 4 - A Libor market model with a stochastic basis Fabio Mercurio (Bloomberg) 5 - Volatility interpolation Jesper Andreasen and Brian Huge (Danske Bank) 6 - Random grids Jesper Andreasen and Brian Huge (Danske Bank) 7 - Being particular about calibration Julien Guyon (Bloomberg) and Pierre Hen...

One of the earliest "alternative" science careers, quantitative finance is now deeply embedded in the world's finance industry

In Computational Finance Using C and C# George Levy raises computational finance to the next level using the languages of both standard C andC#, and Illustrates the use of C# design patterns, including dictionaries, abstract classes, and .NET InteropServices.

Quantitative fi nance is a fi eld that has risen to prominence over the last few decades. It encompasses the complex models and calculations that value fi nancial contracts, particularly those which reference events in the future, and apply probabilities to these events. While adding greatly to the fl exibility of the market available to corporations and investors, it has also been blamed for worsening the impact of fi nancial crises. But what exactly does quantitative fi nance encompass, and where did these ideas and models originate? We show that the mathematics behind fi nance and behind games of ...

Arbitrage pricing theory underpins the historical growth and contemporary importance of financial derivative markets. The theory is developed systematically for equity, FX, commodity, fixed income, and credit markets. Discrete and continuous time dynamic models of asset prices are studied, developing the analytical insight of standard industry models, numerical schemes, and computational practice. These tools are used routinely by practitioners to value portfolios, hedge risk, determine regulatory capital requirements, and maintain and demonstrate regulatory compliance. The Quantitative Financ...

This article reviews My Life As A Quant: Reflections on Physics and Finance by Emanuel Derman, 292 pp.

Prologue: The Two Cultures. Physics and finance. What quants do. The Black-Scholes model. Quants and traders. Pure thought and beautiful mathematics can divine the laws of physics. Can they do the same for finance? Chapter 1. Elective Affinities. The attractions of science. The glory days of particle physics. Driven by ambitious dreams to Co-lumbia. Legendary physicists and budding wunderkinder. Talent vs. character, plans vs. luck. Chapter 2. Dog Years. Life as a graduate student. Wonderful lectures. T.D. Lee, the brightest star in the firmament. Seven lean years. Getting out of graduate scho...

In this paper, we show how market-technical trends can be calculated automatically from underlying priceprocessesusingastopandreverseprocess.Thebasictoolisasocalledminmaxprocessindicating allrelevantminimaandmaxima.Fortheexistenceoftheminmaxprocess,wegiveaconstructiveproof.Severalsuccessfultrend-followingtradingstrategiescanbeimplementedautomaticallybased onthis1-2-3-trendindicator.

This paper discusses how tree-based machine learning techniques can be used in the context of derivatives pricing, and illustrates this methodology by reducing computation times for pricing exotic derivative products and American options.

This invaluable first-hand account of the quantitative revolution in finance since the 1980s recaps the main intellectual challenges successively tackled by the quants—exotic options and the option volatility “smile.”

This invaluable first-hand account of the quantitative revolution in finance since the 1980s recaps the main intellectual challenges successively tackled by the quants—exotic options and the option volatility “smile.”

In the 1930s, when Keynes was writing about the importance of psychology in The General Theory of Employment, Interest, and Money, psychologists had not yet developed the tools upon which modern be...

This book presents a novel approach to characterizing markets in quantitative terms. The examples cut across the world of interest rates, price of gold, stock market and corporate worlds that the stock market rests on, and the pricing of options on financial instruments. The emphasis is on methods of inquiry, methods that can just as easily be applied to other markets and other economic phenomena as well. The goal is to make the methods available to the widest possible audience of quantitative analysts and to the trading desks and investment plans they feed. Quantitative research and modeling ...

This thesis contributes to the quantitative finance literature and consists of four research papers.Paper 1. This paper constructs a hybrid commodity interest rate market model with a stochastic local volatility function that allows the model to simultaneously fit the implied volatility of commodity and interest rate options. Because liquid market prices are only available for options on commodity futures (not forwards), a convexity correction formula is derived to account for the difference between forward and futures prices. A procedure for efficiently calibrating the model to interest rate ...

List of Figures . List of Tables. List of Examples . Foreword . Preface to Volume 1 . I.1 Basic Calculus for Finance . I.1.1 Introduction. I.1.2 Functions and Graphs, Equations and Roots. I.1.3 Differentiation and Integration. I.1.4 Analysis of Financial Returns. I.1.5 Functions of Several Variables. I.1.6 Taylor Expansion. I.1.7 Summary and Conclusions. I.2 Essential Linear Algebra for Finance . I.2.1 Introduction. I.2.2 Matrix Algebra and its Mathematical Applications. I.2.3 Eigenvectors and Eigenvalues. I.2.4 Applications to Linear Portfolios. I.2.5 Matrix Decomposition. I.2.6 Principal Com...

U radu se pored osnovnih modela financijeske matematike razmatraju i neki prosireni modeli zajmova sa varijabilnim anuitetima. Pored toga razmatraju se i metode ocjene financijskih projekata, posebno s visekriterijalnog aspekta

"What initially looked like an impossible undertaking has become a formidable achievement, stretching from the theoretical foundations to the most recent cutting edge methods. Mille bravos!" - Dr Bruno Dupire (Bloomberg L.P.) The Encyclopedia of Quantitative Finance is a major reference work designed to provide a comprehensive coverage of essential topics related to the quantitative modelling of financial markets, with authoritative contributions from leading academics and professionals. Drawing on contributions from a wide spectrum of experts in fields including financial economics, econometr...

The worlds of Wall Street and The City have always held a certain allure, but in recent years have left an indelible mark on the wider public consciousness and there has been a need to become more financially literate. The quantitative nature of complex financial transactions makes them a fascinating subject area for mathematicians of all types, whether for general interest or because of the enormous monetary rewards on offer. An Introduction to Quantitative Finance concerns financial derivatives - a derivative being a contract between two entities whose value derives from the price of an unde...

1. Introduction 2. Fundamental concepts and techniques 3. Modern portfolio theory 4. Market efficiency 5. Capital structure and dividends 6. Valuing levered projects 7. Option pricing in discrete time 8. Option pricing in continuous time 9. Real options analysis 10. Selected option applications 11. Hedging 12. Agency problems and governance Solutions to exercises Glossary Index.

Factorial moments are convenient tools in nuclear physics to characterize the multiplicity distributions when phase-space resolution ($\Delta$) becomes small. For uncorrelated particle production within $\Delta$, Gaussian statistics holds and factorial moments $F_q$ are equal to unity for all orders $q$. Correlations between particles lead to a broadening of the multiplicity distribution and to dynamical fluctuations. In this case, the factorial moments increase above 1 with decreasing $\Delta$. This corresponds to what can be called intermittency. In this letter, we show that a similar analys...

The field of quantitative analysis is often mistaken to be a discipline free from ethical burdens. The quantitative financial analyst or ‘quant’ profession holds a position of significant responsibility as the keeper of mathematical models used in complex derivative security pricing and risk management. Despite this responsibility very few postgraduate programs address the teaching of ethics and professional standards in their curriculum, and the credibility of the profession has suffered as a result of several high-profile financial losses. Some of these failures could have been avoided and t...

1. Interest Rates and Asset Returns. 2. Presentation of Data and Descriptive Statistics. 3. Calculus Applied to Finance. 4. Probability Distributions: Applications to Asset Returns. 5. Statistical Inference: Confidence Intervals and Hypothesis Testing. 6. Regression Analysis. 7. Time Series Analysis. 8. Numerical Methods. 9. Optimization. 10. Continuous Time Mathematics in Finance: Asset Prices as a Stochastic Process. 11. Multivariate Analysis: Principal Components Analysis and Factor Analysis. Appendix: Statistical Tables. Index.

This book will introduce you to F#, using Visual Studio, and provide examples with functional programming and finance combined, and covers topics such as downloading, visualizing and calculating statistics from data.

This introduction to recent developments in modeling equity returns provides a plain-English, formula-free review of quantitative methods—in particular, the trade-offs that must be made among model complexity, risk, and performance. The monograph also includes the results of a 2005 survey of the modeling practiced at 21 large asset management firms.

The active interface of statistical learning methods and quantitative finance models is surveyed, with a focus on the use of statistical surrogates, also known as functional approximators, for learning input–output relationships relevant for financial tasks.

In 1994 and 1998 F. Delbaen and W. Schachermayer published two breakthrough papers where they proved continuous-time versions of the Fundamental Theorem of Asset Pricing. This is one of the most remarkable achievements in modern Mathematical Finance which led to intensive investigations in many applications of the arbitrage theory on a mathematically rigorous basis of stochastic calculus. Mathematical Basis for Finance: Stochastic Calculus for Finance provides detailed knowledge of all necessary attributes in stochastic calculus that are required for applications of the theory of stochastic in...

Guide on resources for finance and quantitative finance SMU resources for analyst reports, industry reports and company annual reports.

The initial part of the book introduces ML more broadly with the financial applications appearing as the book develops, and the foundational models are introduced and discussed mathematically while the more advanced ones are only briefly presented.

This work examines the connection between quantum computing and machine learning in financial applications, spanning a range of use cases including fraud detection, underwriting, Value at Risk, stock market prediction, portfolio optimization, and option pricing by overviewing the corpus of literature concerning various financial subdomains.

With the expected discontinuation of the LIBOR publication, a robust fallback for related financial instruments is paramount. In recent months, several consultations have taken place on the subject. The results of the first ISDA consultation have been published in November 2018 and a new one just finished at the time of writing. This note describes issues associated to the proposed approaches and potential alternative approaches in the framework and the context of quantitative finance. It evidences a clear lack of details and lack of measurability of the proposed approaches which would not be ...

Preface to the Second Edition. Preface to the First Edition. 1 The Quantitative Finance Timeline. 2 FAQs. 3 The Financial Modellers' Manifesto. 4 Essays. 5 The Commonest Mistakes in Quantitative Finance: A Dozen Basic Lessons in Commonsense for Quants and Risk Managers and the Traders Who Rely on Them. 6 The Most Popular Probability Distributions and Their Uses in Finance. 7 Twelve Different Ways to Derive Black-Scholes. 8 Models and Equations. 9 The Black-Scholes Formulo and the Greeks. 10 Common Contracts. 11 Popular Quant Books. 12 The Most Popular Search Words and Phrases on Wilmott.com. 1...

This paper presents a comprehensive summary of quantum computing for traditional and Blockchain financial applications.

An investment decision has become an extensively complicated undertaking in the contemporary finance sphere, dotted by increased volatility, uncertainty, complexity, and ambiguity. Today, investors look beyond financial performance to encapsulate a companys Environmental Social and Governance (ESG) performance and the execution of its social responsibilities to impact society and the planet. The broadening of factors of consideration in an investment decision has propagated an increase in the reliance on quantitative finance. Principally, quantitative finance is an amalgam of mathematical and ...

This new and exciting book offers a fresh approach to quantitative finance and utilises novel features, including stereoscopic images which permit 3D visualisation of complex subjects without the need for additional tools. Offering an integrated approach to the subject, A First Course in Quantitative Finance introduces students to the architecture of complete financial markets before exploring the concepts and models of modern portfolio theory, derivative pricing and fixed income products in both complete and incomplete market settings. Subjects are organised throughout in a way that encourage...

This paper explores the integration of machine learning methodologies into quantitative finance, focusing on applications such as algorithmic trading, credit risk assessment, and asset pricing, and challenges including overfitting, data sparsity, and model interpretability.

Based upon theoretical framework of finance, policy framework of finance, and research methods of quantitative finance and risk management, this paper will review, and discuss the overview of alternative finance theory and issue of quantitative finance and risk management. In addition, potential research topics in quantitative finance and risk management will be suggested.

This paper studies the effects of higher bank capital requirements. Using new firm-lender matched credit data from South Korea, we document that Basel III coincided with a 25% decline in credit from regulated banks, and an increase of similar magnitude from nonbank (shadow) lenders. We use our data to estimate the effect of capital requirements on bank credit, and the spillover effect of the reform on non-bank lending. We then build a general equilibrium model with heterogeneous banks and firms that replicates these micro estimates. We find that Basel III can account for most of the observed...

This work introduces BizBench, a benchmark for evaluating models' ability to reason about realistic financial problems, and conducts an in-depth evaluation of open-source and commercial LLMs, comparing and contrasting the behavior of code-focused and language-focused models.

This chapter surveys the state-of-art of heterogeneous agent models (HAMs) in finance using a jointly theoretical and empirical analysis, combined with numerical and Monte Carlo analysis from the latest development in computational finance. It provides supporting evidence on the explanatory power of HAMs to various stylized facts and market anomalies through model calibration, estimation, and economic mechanisms analysis. It presents a unified framework in continuous time to study the impact of historical price information on price dynamics, profitability and optimality of fundamental and mome...

PurposeThis paper analyzes global interest in Internet information about decentralized finance (DeFi), embedded finance (EmFi), open finance (OpFi), ocean finance (OcFi) and sustainable finance (SuFi) and the relationship among them.Design/methodology/approachThe paper used a comparative methodology based on regression and correlation analyses to assess global interest in Internet information about DeFi, EmFi, OpFi, OcFi and SuFi.FindingsThe findings reveal that global interest in Internet information about EmFi was more popular in Asian and European countries. Global web search for Internet i...

Abstract Identifying the intersection between digital finance, green finance and social finance is important for promoting sustainable financial, social and environmental development. This paper suggests a link between digital finance, green finance and social finance. Using a simple conceptual model, I show that digital finance offers a smooth, efficient and seamless channel for individuals and corporations to fund social projects that deliver a social dividend, and green projects lead to a sustainable environment. The implication is that digital finance is both an enabler and a channel for e...

Backtesting results from the historical limit order book data of NASDAQ-traded stocks show both the performance deterioration of OPS by the market impact costs and the superiority of the proposed OPS method in the environment of limited market liquidity.

This paper presents an empirical study on hedging long-dated crude oil futures options with forward price models incorporating stochastic interest rates and stochastic volatility. Several hedging schemes are considered including delta, gamma, vega and interest rate hedge. Factor hedging is applied to the proposed multi-dimensional models and the corresponding hedge ratios are estimated by using historical crude oil futures prices, crude oil option prices and Treasury yields. Hedge ratios from stochastic interest rate models consistently improve hedging performance over hedge ratios from determ...

In this paper we model a financial market composed of agents with heterogeneous beliefs who change their strategy over time. We propose two different solution methods which lead to two different types of endogenous dynamics. The first makes use of the maximum entropy approach to obtain an exponential type probability function for strategies, analogous to the well known Brock and Hommes (1997) model, but with the endogenous specification for the intensity of choice parameter, which varies over time as a consequence of the relative performances of each strategy. The second type of dynamics is ob...

Lectures on Quantitative Islamic Finance

This book provides simple introduction to quantitative finance for students and junior quants who want to approach the typical industry problems with practical but rigorous ambition and shows a simple link between theoretical technicalities and practical solutions.

Backtesting results from the historical limit order book data of NASDAQ-traded stocks show both the performance deterioration of OPS by the market impact costs and the superiority of the proposed OPS method in the environment of limited market liquidity.

The intent of this Breadth component is to answer this important question by using different research methods in quantitative finance pertaining to the categories of experimental, cross-sectional, quasi-experimental, sample design, econometric models, and stochastic simulations.

This paper was presented and written for two seminars: a national UK University Risk Conference and a Risk Management industry workshop. The target audience is therefore a cross section of Academics and industry professionals. The current ongoing global credit crunch has highlighted the importance of risk measurement in Finance to companies and regulators alike. Despite risk measurement's central importance to risk management, few papers exist reviewing them or following their evolution from its foremost beginnings up to the present day risk measures. This paper reviews the most important port...