Market Risk Neutral Strategies: Modeling and Algorithmization

Modeling and Analysis of Simple Market Strategies

In this report, we consider a simple economic market model: the Sellers Market. In this market, n sellers have various strategies which depend on any number of the (n−1) other sellers, or the current or starting market price of this market. We consider a variety of seller strategies, both deterministic and nondeterministic, defined as real-valued functions, which may or may not be bounded. We a...

Multi agent market modeling based on neutral networks

Are “Market Neutral” Hedge Funds Really Market Neutral?

Using a variety of different definitions of “neutrality,” this study presents significant evidence against the neutrality to market risk of hedge funds in a range of style categories. I generalize standard definitions of “market neutrality,” and propose five different neutrality concepts. I suggest statistical tests for each neutrality concept, and apply these tests to a database of monthly ret...

Risk-neutral Modeling with Affine and Nonaffine Models

Option prices provide a great deal of information regarding the market’s expectations of future asset price dynamics. But, the implied dynamics are under the risk-neutral measure rather than the physical measure under which the price of the underlying asset itself evolves. This article demonstrates new techniques for joint analysis of the physical and risk-neutral models using data from both th...

Modeling market impact and timing risk in volume time

Intraday volatility and market impact models in volume time are proposed. We build an intraday volatility profile to capture non-stationarity of intraday price returns and utilize a fractional Brownian motion process to measure deviations from square root scaling rule of volatility. We propose a generalized, scalable market impact model that encompasses two mainstream approaches: an aggregated ...