Machine learning has become an essential tool in modern finance, transforming the way financial institutions and investors approach data analysis and decision-making. In areas such as portfolio management, algorithmic trading, credit scoring, and fraud detection, machine learning enables more accurate predictions, faster processing of information, and the automation of tasks …

VIX futures are financial derivatives that allow traders to speculate on or hedge against future volatility in the stock market, specifically the S&P 500 index. They are based on the CBOE Volatility Index (VIX), which measures market expectations of near-term volatility. Unlike spot VIX, which reflects current market volatility, VIX …

The Hull-White one-factor (1F HW) interest rate model is a widely used model in finance for simulating the evolution of interest rates over time. It is based on a mean-reverting stochastic process where short-term interest rates revert to a long-term mean at a certain speed. The model incorporates two key …

The macroeconomic announcement premium refers to the phenomenon where financial markets, particularly stock and bond markets, experience higher-than-usual returns on days when significant macroeconomic announcements are made. The premium represents the additional returns investors may receive due to increased trading activity, market reactions, or adjustments to expectations following these announcements. …

A convertible bond is a type of hybrid security that acts like a traditional bond but includes an option to convert the bond into a predetermined number of shares of the issuing company’s stock. This feature offers investors the potential to benefit from rising stock prices while providing downside protection …

VIX futures are financial contracts that allow investors to trade on the expected future volatility of the S&P 500 Index, as measured by the VIX (Volatility Index). These contracts provide a way to hedge against or speculate on changes in market volatility. VIX futures are popular in times of uncertainty, …

The volatility risk premium (VRP) refers to the compensation investors receive for bearing the risk of higher-than-expected market volatility, often manifesting as the difference between implied and realized volatility in options markets. The VRP is not constant; it changes according to the market regime. Reference proposed a timing scheme …

The Hurst exponent is a statistical measure used to evaluate the long-term memory or autocorrelation of a time series, indicating whether a system exhibits trending behavior, mean-reverting characteristics, or randomness. A Hurst exponent greater than 0.5 signifies the existence of long-range dependence, implying that previous trends are prone to persisting …

Volume is an essential, integral market data. However, it receives much less attention in research literature compared to price data. Understanding and being able to model volume dynamics is important because buy-side firms must plan and time their trades to avoid significantly impacting the market, revealing their identities, and incurring …

Dividend futures are financial derivatives that allow investors to speculate on or hedge against the future dividend payments of a specific company or index. Unlike traditional equity futures, which are based on the price of the underlying asset, dividend futures are directly linked to the dividends that a company or …