The frontier of quantitative finance, in one feed. The newest peer-review-bound research from arXiv’s q-fin archive — trading and market microstructure, portfolio management, risk, pricing, and machine learning in markets — with titles, authors, and abstracts, linked straight to source. Updated continuously.
Measuring and managing market, credit, and tail risk.
Portfolio Managementq-fin.RM4d ago
Jun Cai, Tiantian Mao, Zhiqiao Song
In this paper, we present robust portfolio selection models by incorporating a reward and penalty mechanism into portfolio management. We assume that the joint distribution of the losses of the underlying risky assets in a portfolio is uncertain but lies within a multivariate distribution set. Our goal is to identify optimal portfolio all…
Risk Management4d ago
Jonas Brunholm, Bjarne Højgaard, Thomas D. Nielsen, Orimar Sauri
This paper proposes a framework for modeling probability of default via functional data analysis. By representing a series of credit variables as functions, we investigate whether intra-monthly information improves default predictability in linear models. We further show how a range of widely used variables, among them available funds, ut…
Risk Management5d ago
Yew Lee Tan
Regulated credit scoring requires scores monotone non-decreasing in every exposure input. Deployed pipelines -- hand-crafted monotone aggregates feeding sign-constrained gradient boosting -- already meet this by composition; the open question is what learned temporal aggregation is worth inside one. We answer on five production-scale cred…
math.STq-fin.RM5d ago
Olivier Guéant
In actuarial science and quantitative finance, convex order provides a natural way to compare risks with the same mean. In dimension one, convex order is well understood through several characterisations. In higher dimensions, a natural approach is to compare all one-dimensional projections, but, although necessary, the resulting conditio…
Risk Management5d ago
Arno Botha, Henko Crewe, Marcel Muller, Janette Larney
The use of run-off triangles (ROTs) is a common industry practice in estimating the loss given default (LGD) risk parameter when predicting credit losses in banking. We benchmark this industry practice using credit card data against a more sophisticated (though classical) regression-based approach, which is able to leverage various types …
stat.MEq-fin.RM6d ago
Sebastián Calcetero Vanegas, Ian Weng Chan
Credibility theory combines individual experience with portfolio information for insurance pricing, but classical formulations focus primarily on conditional means and expected premiums. We propose a Dirichlet mixed-membership model (DMMM) for multivariate distributional credibility. Policyholder risk is represented by a stable compositio…
cs.LGq-fin.RM6d ago
Yew Lee Tan
Risk regulation imposes directional constraints on scores; we adopt their strict per-input form -- the score monotone non-decreasing in every exposure input -- as a normative commitment. Deployed pipelines -- monotone hand-crafted aggregates feeding sign-constrained gradient boosting -- already satisfy it by composition, so constrained-ve…
Portfolio Managementq-fin.RM8d ago
Jun Cai, Zhiqiao Song
The enhanced index tracking (EIT) portfolio selection problem aims to construct a portfolio that is expected to outperform a benchmark index. In practice, investors face uncertainty in the joint distribution of asset and index losses, as the true distribution is typically unknown and only partial information is available. Moreover, portfo…
quant-phq-fin.RM8d ago
Nirvik Sahoo, Paul Robert Griffin
Feature selection for imbalanced classification tasks such as credit card fraud and consumer default detection requires balancing predictive relevance, inter-feature redundancy, and computational feasibility. We benchmark three computing paradigms, classical branch-and-bound optimization (Gurobi), photonic entropy computing (QCI Dirac-3),…
Pricing of Securitiesq-fin.RM10d ago
Andres Medina, Wei Wei
Catastrophe bonds have become a central instrument for transferring catastrophic risk to capital markets, yet their payout structures are typically specified exogenously rather than optimized. In this paper, we treat the indemnity function as the decision variable and study the optimal design of CAT bonds from the sponsor's perspective. W…
Computational Financeq-fin.MFq-fin.PM11d ago
Balaji Ramachandran, Srikanth Iyer, Shashi Jain
Bank treasury portfolios must balance yield, liquidity, and interest-rate risk across bonds of different maturities. Static allocation rules are ill-suited to this task: portfolios concentrated in long-duration securities with no dynamic adjust- ment mechanism can accumulate large mark-to-market losses and liquidity stress under rising in…
Risk Management12d ago
Nawaf Mohammed, Edward Furman
We compare two natural proportional notions of a risk component's contribution to the aggregate tail risk of a collection of risks: the fraction of aggregate tail risk capital allocated to the component under Conditional Tail Expectation (CTE), and the component's expected realized share of aggregate risk under Geometric Tail Expectation …
cs.LGq-fin.CPq-fin.RM12d ago
Jean-Loup Dupret, Donatien Hainaut, Edouard Motte
We introduce a deep kernel hedging framework that combines the flexibility of deep learning with the structural inductive bias of kernel methods. The hedging functional is restricted to a reproducing kernel Hilbert space whose kernel is parameterized through a neural network embedding of the input features. The framework minimizes a regul…
cs.CEq-fin.RM15d ago
Yuhe Sui
The internal-models approach of the Fundamental Review of the Trading Book (FRTB-IMA) determines market-risk capital at the aggregate level of a bank's approved trading desks, but it does not say how that charge should be attributed to individual trades. Risk managers, capital planners and validators often need one, and it is hard to obta…
Risk Management15d ago
Maria Andraos, Mario Ghossoub
We consider an insurance market with hidden information, where the agent's type is private information and is drawn from an arbitrary type space. We study implementability of a collection of retention functions, namely, how to select premium schedules so that the resulting menu of contracts is incentive compatible, or truthful. Specifical…
cs.AIq-fin.GNq-fin.RM15d ago
Hamid Boustanifar, Sasan Mansouri
Researchers increasingly use generative large language models (LLMs) to convert corporate text into empirical variables. We examine the extent to which LLM-based textual measures are invariant to model choice using thirteen measures, including sentiment, management clarity, uncertainty, answer specificity, and climate and political risk. …
cs.LGq-fin.RM16d ago
Bashir Zeimarani, Alireza Khatib, Somayeh Mousavinasr, Carlos Maurício Serodio Figueiredo
Brazil's Pix settles about 5.9 billion instant, irreversible transfers a month. A fraudulent transfer can be recovered only while the funds remain in a traceable account, and in 2025 the Central Bank's recovery mechanism (MED) returned 9% of accepted contested value. Interdiction therefore has to happen before settlement, by routing each …
Risk Management16d ago
Mihaela-Adriana Nistor, Ionel Popescu
We study a two-regime summary of a real-valued loss distribution. The two representative levels and the boundary between them are chosen by minimizing a convex residual loss. When the distribution has an atom at the boundary, assigning that atom to the lower or upper regime can give different optimized costs. Taking the better whole-atom …
General Financeq-fin.RM17d ago
Walter Kurz
This paper proposes a formal multi-agent architecture for implementing enterprise AI in regulated insurance firms, integrating economic theory with institutional design. The framework synthesises three core theoretical perspectives: Arrow's risk pooling theory to formalise risk transformation under uncertainty, Nash equilibrium to model s…
math.PRq-fin.MFq-fin.RM18d ago
Hamed Amini, Zhecheng Wu
We study equilibrium and risk evaluation in large sparse economic networks with heterogeneous responses, shocks, and bilateral exposures. Our approach approximates the distribution of equilibrium outcomes through local computations on a limiting rooted network. Under marked local weak convergence, we prove convergence in probability of th…
Computational Financeq-fin.RM18d ago
Andrzej Tokajuk, Jarosław A. Chudziak
Volatility forecasts play a central role in financial risk management because their overall level and day-to-day movements affect downstream decisions. Most studies compare forecasting models while keeping the training loss fixed. Yet losses emphasise different errors and can target different properties of future volatility, so raw compar…
stat.MLq-fin.RM18d ago
Mario V. Wüthrich
This manuscript formalizes the most popular model validation tools used in general insurance actuarial modeling. These include graphical tools like calibration plots, actual-vs-expected plots, lift charts, Murphy diagrams, as well as classical statistical tools such as Bregman losses, deviance losses, elementary losses, Murphy's decomposi…
math.PRq-fin.RM18d ago
Alfred Müller
The concept of weighted universal Value-at-Risk superadditivity (WUVS) was recently introduced by Chen et al. (2026) as a generalization of the question whether for some infinite mean distributions convex combinations of i.i.d. random variables can stochastically dominate the parent distribution. In this short note we prove that the prope…
math.PRq-fin.RM19d ago
Peng Liu, Tiantian Mao
In this paper, we study the diversification properties of convex combinations of iid infinitely divisible random variables. For Lévy processes with bounded variation sample paths, we characterize, in terms of subadditivity and concavity of the transformed Lévy tails, Lévy processes that exhibit the non-diversification phenomenon or the re…
stat.MEq-fin.RM19d ago
Vassilis Polimenis
Lepto-regression is defined as the machine learning process of constructing a Regression Tree of a target feature on itself. It is a novel, model-free method potentially revealing information on important sample structure properties. But it is yet not clear what the informational content of lepto-variance is and how it is related to other…
Risk Management20d ago
Nacira Agram, Jan Rems, Emanuela Rosazza Gianin
We study optimal stopping under dynamic risk measures with simultaneous ambiguity in the probability model and the discount rate. We introduce a paired ambiguity framework combining Girsanov model uncertainty with cash subadditive risk evaluation and characterize the stopping value by an upper reflected backward stochastic differential eq…
math.OCq-fin.MFq-fin.RM21d ago
Chung-Han Hsieh
Mitigating \emph{drawdown}, the decline in wealth from its running peak, presents a canonical problem in path-dependent risk control. In this paper, we develop a finite-horizon control framework that enforces a prescribed maximum percentage drawdown limit in multi-asset stochastic systems. Our first result is an exact robust-invariance th…
Pricing of Securitiesq-fin.RM22d ago
John Ery, Erwan Koch
Catastrophe (cat) bonds overcome some lack of reinsurance by sourcing capacity from the wider capital markets. We present a new type of cat bond addressing the known trade-off between moral hazard and basis risk. As our main contributions we propose a trigger mechanism which is entirely transparent and simpler to evaluate compared to inde…
cs.AIq-fin.RM23d ago
Veronika Batzdorfer, Carlo Romano Marcello Alessandro Santagiustina
High annotation reproducibility does not necessarily imply that an LLM-inferred measure captures the construct it is intended to measure. We test this distinction using a dataset from the European Commission's AI Act consultation, linking structured survey responses to free-text consultation submissions from the same stakeholders. LLM ann…
cs.AIq-fin.RM26d ago
LiYang Wang, Zhen Zhong, Zhen Tian, Keyu Chen +1
Advancements in data fusion and real-time analytics technologies have opened new avenues for addressing complex domain challenges. Financial risk early warning systems often suffer from inefficiency due to information silos and monitoring delays. This paper proposes a credit risk early warning system based on heterogeneous information fus…
Risk Management26d ago
Said Khalil, Fatima Zahrae Chaayra
The 2027 Solvency II reform recalibrates the Risk Margin by reducing the prescribed cost-of-capital rate from 6% to 4.75% and introducing a time-dependent attenuation of future Solvency Capital Requirements. This paper develops an analytical and numerical framework for characterizing the effect of the final regulatory calibration. By norm…
Risk Management27d ago
Christopher Blier-Wong
Claim narratives, images and sensor data contain information about insured risks that is difficult to use through existing actuarial models. Foundation models learn patterns from large datasets before being adapted to particular tasks. By turning these high-dimensional sources into variables or numerical representations, they could help i…
cs.SEq-fin.RM27d ago
Zhen Zhong
Against the backdrop of digital transformation and stricter regulation, enterprise compliance work demands higher efficiency and accuracy. The auxiliary compliance process has become an important entry point for optimizing the compliance system due to its strong transactional nature and high degree of repetition. This study focuses on the…
cs.CEq-fin.RM28d ago
Yu Peng, Matloob Khushi, Josiah Poon
Managing drawdown, the peak-to-trough decline in an investment portfolio's value, is a precondition for long-term survival in practical investment management. However, mainstream stock forecasting methods predominantly optimize returns or Sharpe ratios under the independent and identically distributed (i.i.d.) assumption. Real markets do …
Portfolio Managementq-fin.RMq-fin.ST28d ago
David Reinhardt
Special Markowitz (SM) regularises returns and covariance jointly, relative to a reference state (mu_ref, Sigma_ref). Each eigendirection of the whitened relative operator carries a signed spectral potential Phi_k, with persistence factor psi_k = exp(-Phi_k) > 0. Positive potentials attenuate empirical deviations from the reference geomet…
Computational Financeq-fin.PMq-fin.RM29d ago
Yinbin Han, Jack Yuxiang Zhang, Manuel Torres, Fernando Acero +1
We develop a diffusion-model framework for dynamic implied-volatility surface generation and evaluate its economic usefulness through data-driven hedging. The framework consists of two models. AD-Seq-Vol jointly learns the conditional evolution of the underlying asset return and the high-dimensional implied-volatility surface, generating …
Portfolio Managementq-fin.RM1mo ago
Jaehyung Choi
We develop Entropic Value-at-Risk (EVaR) parity for tempered stable returns. EVaR-based inverse risk parity (IRP) and equal risk contribution (ERC) portfolios are constructed using multivariate normal tempered stable models and independent component analysis with tempered stable components. We derive the corresponding asset-level EVaR and…
stat.MEq-fin.RM1mo ago
Ayla Jungbluth, Johannes Lederer, Simon Trimborn
Modeling the joint distribution of extreme values in high-dimensional financial time series is challenging because extremes are sparse and locally extreme observations are not necessarily extreme relative to their full marginal distribution. To address this, we introduce a time-dependent network Hüsler-Reiss model in which market-informed…
cs.LGq-fin.RM1mo ago
Gijs A. F. Niewzwaag, Marijn G. S. Veth, Manuele Massei, Marcos R. Machado
Machine learning-based credit scoring is increasingly central to Peer-to-Peer (P2P) lending, yet its resilience to adversarial manipulation, where applicants strategically alter self-reported inputs to secure favourable decisions, remains poorly understood. Most adversarial-robustness evidence comes from image and text domains and evaluat…
Risk Management1mo ago
Marina Palaisti
This paper develops a public-data framework for evaluating incremental bank lending when plausible climate scenarios imply different sector credit outcomes but defensible scenario probabilities are unavailable. The calibration combines 2025 Shared National Credit industry commitments, January 2026 U.S. industry leverage, interest coverage…
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