Andrew Nguyen @WorkLifePlus

Jumps and Volatility Clustering in AI-Driven Markets ift.tt/6wq4xkm AI-assisted trading is a growing area in quantitative finance. However, concerns have emerged that it may destabilize markets. We recently discussed how trading strategies generated by large language …

Reducing Path Dependency in Options PnL ift.tt/nJRufBF The profit and loss of an options trading strategy can be path-dependent, meaning that interim price movements, not just the final outcome, significantly influence profits and losses due to factors like dynamic he…

Hedging with Puts: Do Volatility and Skew Signals Work? ift.tt/V1BX0CY Portfolio hedging remains a complex and challenging task. A straightforward method to hedge an equity portfolio is to buy put options. However, this approach comes at a cost—the option premiums—lea…

Speeding Up Derivatives Pricing Using Machine Learning ift.tt/w4A2YrP A financial derivative is a financial contract whose value depends on the price of an underlying asset such as a stock, bond, commodity, or index. Accurate valuation of financial derivatives and the…

Commented on: Calibration of Hull-White Two-Factor Interest Rate Model ift.tt/rOjAWqF Calibration of Hull-White Two-Factor Interest Rate Model The Hull-White one-factor (1F HW) interest rate model is a widely used model in finance for simulating the evolution of inter…

Commented on: Measuring Stock Market Dispersion: The Herd Behavior Index Approach ift.tt/s34wz5d Measuring Stock Market Dispersion: The Herd Behavior Index Approach Dispersion in the stock market refers to the degree of variation in individual stock returns within an …

Commented on: Joint Calibration of SPX and VIX Options Using the Willow Tree Method ift.tt/OpVKxGS Joint Calibration of SPX and VIX Options Using the Willow Tree Method The willow tree method is a powerful technique with many applications in derivative pricing. This …

Commented on: Profitability of Cross-Sectional Momentum Strategy ift.tt/3CFx0rt Profitability of Cross-Sectional Momentum Strategy Cross-sectional momentum is an investment strategy that involves ranking and selecting assets based on their past performance relative to…

The Calendar Effects in Volatility Risk Premium ift.tt/7Oa4ngX I recently covered calendar anomalies in the stock markets. Interestingly, patterns over time also appear in the volatility space. In this issue, I’ll discuss the seasonality of volatility risk premium (VR…

Joint Calibration of SPX and VIX Options Using the Willow Tree Method ift.tt/uGxZiMA The willow tree method is a powerful technique with many applications in derivative pricing. We have discussed how it can be used to determine the implied volatilities of American opt…

Commented on: Performance of Momentum Funds ift.tt/VPTtxFv Performance of Momentum Funds Across several time frames and equity markets, momentum trading strategies that involve buying past winners and selling past losers have produced considerable gains. This study e…

Volatility Risk Premium Seasonality Across Calendar Months ift.tt/sL16f8Y Seasonality in investing refers to the tendency of financial markets or specific assets to exhibit predictable patterns at certain times of the year. These patterns can arise due to recurring ec…

Enhancing Trading Strategies Using Model Uncertainty ift.tt/XI6PTG4 Most trading systems focus on algorithms for generating entry and exit signals. When the performance deteriorates, developers often try to introduce additional filters and/or modify system parameters.…

Extension of the Black-Scholes-Merton Model to Include Supply Change Rate for Ethereum Options ift.tt/zqDYu0G Ethereum (ETH) is a cryptocurrency that resembles a combination of a currency, a stock, and a commodity. It is a non-dividend-paying crypto asset with a dynam…

Machine Learning in Financial Markets: When It Works and When It Doesn’t ift.tt/YEApH1y Machine learning (ML) has made a lot of progress in recent years. However, there are still skeptics, especially when it comes to its application in finance. In this issue, I will f…

Commented on: Are Weekend Gaps Always Filled? A Look at Stock Indices ift.tt/FH3S2xY Are Weekend Gaps Always Filled? A Look at Stock Indices The weekend price gap is a well-known phenomenon in financial markets, particularly in assets that trade continuously during th…

Time Series vs. Machine Learning: A Systematic Evaluation ift.tt/ivkQurs Forecasting is important in finance, as it helps investors, analysts, and institutions make informed decisions under uncertainty. Up to now, most forecasting techniques have relied on traditional…

Commented on: Is Gold a Strong Hedge and a Safe Haven Asset? ift.tt/NWjdM0P Is Gold a Strong Hedge and a Safe Haven Asset? Gold plays an important role as a diversifier in investment portfolios due to its unique characteristics. Gold’s role as a hedge or safe haven i…

Implied Volatilities From a Behavioural Finance Perspective ift.tt/5tEGAPq We have discussed at length the implied volatility and its relationships with realized volatility, volatility skew, dividend yield, and correlations. Moreover, it is interesting to examine impl…

Variational Autoencoders for Arbitrage-Free Volatility Modeling ift.tt/JkqCS58 Machine learning and AI are transforming investing by enabling data-driven decision-making, uncovering hidden patterns, and automating complex strategies. From algorithmic trading and portf…