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Improving Vix Futures Forecasts Using Machine Learning Methods, James Hosker, Slobodan Djurdjevic, Hieu Nguyen, Robert Slater
Improving Vix Futures Forecasts Using Machine Learning Methods, James Hosker, Slobodan Djurdjevic, Hieu Nguyen, Robert Slater
SMU Data Science Review
The problem of forecasting market volatility is a difficult task for most fund managers. Volatility forecasts are used for risk management, alpha (risk) trading, and the reduction of trading friction. Improving the forecasts of future market volatility assists fund managers in adding or reducing risk in their portfolios as well as in increasing hedges to protect their portfolios in anticipation of a market sell-off event. Our analysis compares three existing financial models that forecast future market volatility using the Chicago Board Options Exchange Volatility Index (VIX) to six machine/deep learning supervised regression methods. This analysis determines which models provide best …
On The Total Duration Of Negative Surplus Of A Risk Process With Two-Step Premium Function, Pavlina Jordanova
On The Total Duration Of Negative Surplus Of A Risk Process With Two-Step Premium Function, Pavlina Jordanova
Applications and Applied Mathematics: An International Journal (AAM)
We consider a risk reserve process whose premium rate reduces from cd to cu when the reserve comes above some critical value v. In the model of Cramer-Lundberg with initial capital u ≥ 0, we obtain the probability that ruin does not occur before the first up-crossing of level v. When u < v, following H. Gerber and E. Shiu (1997), we derive the probability that starting with initial capital u ruin occurs and the severity of ruin is not bigger than v. Further we express the probability of ruin in the two step premium function model - ψ (u,v), by the last two probabilities. Our assumptions imply that the surplus process will go to infinity almost surely. This entails that the process will stay below zero only temporarily. We derive the distribution of the total duration of negative surplus and obtain its Laplace transform and mean value. As a consequence of these results, under certain conditions in the Model of Cramer-Lundberg we obtain the expected value of the severity of ruin. In the end of the paper we give examples with exponential claim sizes.