arXiv subjects

Vladislav Kargin

Publications and source records attributed to Vladislav Kargin.

45 records · Page 3Linked to original sources

arXiv2004

Lattice Option Pricing By Multidimensional Interpolation

This note proposes a method for pricing high-dimensional American options based on modern methods of multidimensional interpolation. The method allows using sparse grids and thus mitigates the curse of dimensionality. A framework of the pricing algorithm and the corresponding interpolation methods are discussed, and a theorem is demonstrated that suggests that the pricing method is less vulnerable to the curse of dimensionality. The method is illustrated by an application to rainbow options and compared to Least Squares Monte Carlo and other benchmarks.

math.GM↗

arXiv2004

Dynamics of Interest Rate Curve by Functional Auto-Regression

The paper uses functional auto-regression to predict the dynamics of interest rate curve. It estimates the auto-regressive operator by extending methods of the reduced-rank auto-regression to the functional data. Such an estimation technique is better suited for prediction purposes as opposed to the methods based either on principal components or canonical correlations. The consistency of the estimator is proved using methods of operator theory. The estimation method is used to analyze dynamics of Eurodollar futures rates. The results suggest that future movements of interest rates are predictable at 1-year horizons.

math.ST↗

arXiv2004

Coordination Games with Quantum Information

The paper discusses coordination games with remote players that have access to an entangled quantum state. It shows that the entangled state cannot be used by players for communicating information, but that in certain games it can be used for improving coordination of actions. A necessary condition is provided that helps to determine when an entangled quantum state can be useful for improving coordination.

quant-ph↗

arXiv2003

Consistent Estimation of Pricing Kernels from Noisy Price Data

If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new method is suggested: relaxed maximization of the relative entropy. This estimator is also consistent. Keywords: $ε$-entropy, non-parametric estimation, pricing kernel, inverse problems.

math.ST↗

arXiv2003

Optimal Convergence Trading

This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and threshold policies are derived. The optimal differentiable policy is linear with respect to mispricing and risk-free in the long run. The optimal threshold policy calls for investing immediately when the mispricing is greater than zero with the investment amount inversely proportional to the risk aversion parameter. The investment is risky even in the long run. The results are consistent with the belief that credit-constrained arbitrageurs should be risk-neutral if they are to engage in convergence trading.

math.OC↗

arXiv2003

On the Chernoff bound for efficiency of quantum hypothesis testing

The paper estimates the Chernoff rate for the efficiency of quantum hypothesis testing. For both joint and separable measurements, approximate bounds for the rate are given if both states are mixed and exact expressions are derived if at least one of the states is pure. The efficiency of tests with separable measurements is found to be close to the efficiency of tests with joint measurements. The results are illustrated by a test of quantum entanglement.

math.ST↗

arXiv2003

Optimal Asset Allocation with Asymptotic Criteria

Assume (1) asset returns follow a stochastic multi-factor process with time-varying conditional expectations; (2) investments are linear functions of factors. This paper calculates asymptotic joint moments of the logarithm of investor's wealth and the factors. These formulas enable fast computation of a wide range of investment criteria. The results are illustrated by a numerical example that shows that the optimal portfolio rules are sensitive to the specification of the investment criterion.

math.OC↗

arXiv2003

Uncertainty of the Shapley Value

This paper introduces a measure of uncertainty in the determination of the Shapley value, illustrates it with examples, and studies some of its properties. The introduced measure of uncertainty quantifies random variations in a player's marginal contribution during the bargaining process. The measure is symmetric with respect to exchangeable substitutions in the players, equal to zero for dummy player, and convex in the game argument. The measure is illustrated by several examples of abstract games and an example from epidemiology.

math.GM↗

arXiv2003

On Bond Portfolio Management

This paper describes a new method of bond portfolio optimization based on stochastic string models of correlation structure in bond returns. The paper shows how to approximate correlation function of bond returns, compute the optimal portfolio allocation using Wiener-Hopf factorization, and check whether a collection of bonds presents arbitrage opportunities.

math.OC↗