Factor models
Quantum cognition machine learning: financial forecasting
A new paradigm for training machine learning algorithms based on quantum cognition is presented
The role of a green factor in stock prices: when Fama and French go green
The authors propose a means to capture climate change risk exposure by combining a green factor with typical frameworks used for explaining stock returns.
Into the quantiverse: real-world pricing goes arbitrage-free
QRM quants claim to have bridged divide across ‘multiverse’ of fixed-income models
The factor Heath-Jarrow-Morton term structure
A framework for rates that links real-world and risk-neutral measures is presented
How banks can avoid bad haircuts on hedge fund trades
HSBC quant makes case for looking at collateral and funding rates in concert
Large vector autoregressive exogenous factor (VARX) model with network regularization
In this paper the authors introduce a novel penalty method for the VARX model in the context of portfolio returns, which aggregates the information from the financial networks of portfolios.
Assessing climate risk in bond portfolios
Running climate stress tests on bond portfolios is a nascent exercise for many asset managers. MSCI looks at what to consider when optimising bond portfolios for climate exposures
Uncertain risk parity
This paper treats covariance as uncertain in order to find a risk parity weighting that does not count on perfectly optimized hedges and is robust to changes in regime.
Factor woes prove need for better timing – QuantZ’s Sharma
Investors should switch between factors as alphas change, says quant
My kingdom for the right copula
Copulas can still deliver if chosen with due attention to intuition and data, says quant fund chair
A FAVAR modeling approach to credit risk stress testing and its application to the Hong Kong banking industry
In this paper, a credit risk stress testing model based on the factor-augmented vector autoregressive (FAVAR) approach is proposed to project credit risk loss under stressed scenarios.
Detecting changes in asset co-movement using autoencoders
ARR aims to anticipate volatility patterns to provide signals for risk management and trading
A regime-switching factor model for mean–variance optimization
In this paper the authors formulate a novel Markov regime-switching factor model to describe the cyclical nature of asset returns in modern financial markets.
Factor-based tactical bond allocation and interest rate risk management
This paper offers two composite bond market factor investment strategies each for the Swiss bond market and for the global sovereign bond market.
Quants clash: machine learning or linear models?
Some studies say the algorithms beat the common models; other studies say the opposite
Natixis creates model to ‘learn’ how factors interact
Random forest technique sheds light on flux in how factors mix, manager says
Factor timing: scant upside, big downside
Stock selection trounces “tempting” factor timing in study
Risk premia strategies do not reward downside
Study says alt premia approaches do not compensate for exposure to rough markets; hints at data mining
A review of the state of the art in quantifying operational risk
In this paper, the authors provide a comprehensive review of the different approaches developed to model operational risk, specifically focusing on the actuarial approach.
Value factor strategies ripe for revival, quants say
Stocks rated for value are historically cheap compared with growth stocks, evidence shows
Factor funds ‘do right things for wrong reasons’ – Intech
Firm says conventional investing wisdom is missing out on alpha