pwc-archive/papers-with-abstracts huggingface dataset:
Stock Movement Prediction with Multimodal Stable Fusion via Gated Cross-Attention Mechanism
Authors: Chang Zong, Hang Zhou
Date: 2024-06-06 00:00:00
Tasks: Sentiment Analysis

The accurate prediction of stock movements is crucial for investment strategies. Stock prices are subject to the influence of various forms of information, including financial indicators, sentiment analysis, news documents, and relational structures. Predominant analytical approaches, however, tend to address only unimodal or bimodal sources, neglecting the complexity of multimodal data. Further complicating the landscape are the issues of data sparsity and semantic conflicts between these modalities, which are frequently overlooked by current models, leading to unstable performance and limiting practical applicability. To address these shortcomings, this study introduces a novel architecture, named Multimodal Stable Fusion with Gated Cross-Attention (MSGCA), designed to robustly integrate multimodal input for stock movement prediction. The MSGCA framework consists of three integral components: (1) a trimodal encoding module, responsible for processing indicator sequences, dynamic documents, and a relational graph, and standardizing their feature representations; (2) a cross-feature fusion module, where primary and consistent features guide the multimodal fusion of the three modalities via a pair of gated cross-attention networks; and (3) a prediction module, which refines the fused features through temporal and dimensional reduction to execute precise movement forecasting. Empirical evaluations demonstrate that the MSGCA framework exceeds current leading methods, achieving performance gains of 8.1%, 6.1%, 21.7% and 31.6% on four multimodal datasets, respectively, attributed to its enhanced multimodal fusion stability.
Gas Fees on the Ethereum Blockchain: From Foundations to Derivatives Valuations
Authors: Bernhard K Meister, Henry CW Price
Date: 2024-06-10 00:00:00

The gas fee, paid for inclusion in the blockchain, is analyzed in two parts. First, we consider how effort in terms of resources required to process and store a transaction turns into a gas limit, which, through a fee, comprised of the base and priority fee in the current version of Ethereum, is converted into the cost paid by the user. We adhere closely to the Ethereum protocol to simplify the analysis and to constrain the design choices when considering multidimensional gas. Second, we assume that the gas price is given deus ex machina by a fractional Ornstein-Uhlenbeck process and evaluate various derivatives. These contracts can, for example, mitigate gas cost volatility. The ability to price and trade forwards besides the existing spot inclusion into the blockchain could enable users to hedge against future cost fluctuations. Overall, this paper offers a comprehensive analysis of gas fee dynamics on the Ethereum blockchain, integrating supply-side constraints with demand-side modelling to enhance the predictability and stability of transaction costs.
Convex ordering for stochastic control: the swing contracts case
Authors: Gilles Pagès, Christian Yeo
Date: 2024-06-11 00:00:00

We investigate propagation of convexity and convex ordering on a typical stochastic optimal control problem, namely the pricing of \q{\emph{Take-or-Pay}} swing option, a financial derivative product commonly traded on energy markets. The dynamics of the underlying asset is modelled by an \emph{ARCH} model with convex coefficients. We prove that the value function associated to the stochastic optimal control problem is a convex function of the underlying asset price. We also introduce a domination criterion offering insights into the monotonicity of the value function with respect to parameters of the underlying \emph{ARCH} coefficients. We particularly focus on the one-dimensional setting where, by means of Stein's formula and regularization techniques, we show that the convexity assumption for the \emph{ARCH} coefficients can be relaxed with a semi-convexity assumption. To validate the results presented in this paper, we also conduct numerical illustrations.
An Algebraic Framework for the Modeling of Limit Order Books
Authors: Johannes Bleher, Michael Bleher
Date: 2024-06-07 00:00:00

Introducing an algebraic framework for modeling limit order books (LOBs) with tools from physics and stochastic processes, our proposed framework captures the creation and annihilation of orders, order matching, and the time evolution of the LOB state. It also enables compositional settings, accommodating the interaction of heterogeneous traders and different market structures. We employ Dirac notation and generalized generating functions to describe the state space and dynamics of LOBs. The utility of this framework is shown through simulations of simplified market scenarios, illustrating how variations in trader behavior impact key market observables such as spread, return volatility, and liquidity. The algebraic representation allows for exact simulations using the Gillespie algorithm, providing a robust tool for exploring the implications of market design and policy changes on LOB dynamics. Future research can expand this framework to incorporate more complex order types, adaptive event rates, and multi-asset trading environments, offering deeper insights into market microstructure and trader behavior and estimation of key drivers for market microstructure dynamics.
A Multi-step Approach for Minimizing Risk in Decentralized Exchanges
Authors: Daniele Maria Di Nosse, Federico Gatta
Date: 2024-06-11 00:00:00

Decentralized Exchanges are becoming even more predominant in today's finance. Driven by the need to study this phenomenon from an academic perspective, the SIAG/FME Code Quest 2023 was announced. Specifically, participating teams were asked to implement, in Python, the basic functions of an Automated Market Maker and a liquidity provision strategy in an Automated Market Maker to minimize the Conditional Value at Risk, a critical measure of investment risk. As the competition's winning team, we highlight our approach in this work. In particular, as the dependence of the final return on the initial wealth distribution is highly non-linear, we cannot use standard ad-hoc approaches. Additionally, classical minimization techniques would require a significant computational load due to the cost of the target function. For these reasons, we propose a three-step approach. In the first step, the target function is approximated by a Kernel Ridge Regression. Then, the approximating function is minimized. In the final step, the previously discovered minimum is utilized as the starting point for directly optimizing the desired target function. By using this procedure, we can both reduce the computational complexity and increase the accuracy of the solution. Finally, the overall computational load is further reduced thanks to an algorithmic trick concerning the returns simulation and the usage of Cython.
Optimizing Sharpe Ratio: Risk-Adjusted Decision-Making in Multi-Armed Bandits
Authors: Sabrina Khurshid, Mohammed Shahid Abdulla, Gourab Ghatak
Date: 2024-05-28 00:00:00
Tasks: Decision Making, Management, Multi-Armed Bandits

Sharpe Ratio (SR) is a critical parameter in characterizing financial time series as it jointly considers the reward and the volatility of any stock/portfolio through its variance. Deriving online algorithms for optimizing the SR is particularly challenging since even offline policies experience constant regret with respect to the best expert Even-Dar et al (2006). Thus, instead of optimizing the usual definition of SR, we optimize regularized square SR (RSSR). We consider two settings for the RSSR, Regret Minimization (RM) and Best Arm Identification (BAI). In this regard, we propose a novel multi-armed bandit (MAB) algorithm for RM called UCB-RSSR for RSSR maximization. We derive a path-dependent concentration bound for the estimate of the RSSR. Based on that, we derive the regret guarantees of UCB-RSSR and show that it evolves as O(log n) for the two-armed bandit case played for a horizon n. We also consider a fixed budget setting for well-known BAI algorithms, i.e., sequential halving and successive rejects, and propose SHVV, SHSR, and SuRSR algorithms. We derive the upper bound for the error probability of all proposed BAI algorithms. We demonstrate that UCB-RSSR outperforms the only other known SR optimizing bandit algorithm, U-UCB Cassel et al (2023). We also establish its efficacy with respect to other benchmarks derived from the GRA-UCB and MVTS algorithms. We further demonstrate the performance of proposed BAI algorithms for multiple different setups. Our research highlights that our proposed algorithms will find extensive applications in risk-aware portfolio management problems. Consequently, our research highlights that our proposed algorithms will find extensive applications in risk-aware portfolio management problems.
Adaptive combinations of tail-risk forecasts
Authors: Alessandra Amendola, Vincenzo Candila, Antonio Naimoli, Giuseppe Storti
Date: 2024-06-10 00:00:00
Tasks: Management

In order to meet the increasingly stringent global standards of banking management and regulation, several methods have been proposed in the literature for forecasting tail risk measures such as the Value-at-Risk (VaR) and Expected Shortfall (ES). However, regardless of the approach used, there are several sources of uncertainty, including model specifications, data-related issues and the estimation procedure, which can significantly affect the accuracy of VaR and ES measures. Aiming to mitigate the influence of these sources of uncertainty and improve the predictive performance of individual models, we propose novel forecast combination strategies based on the Model Confidence Set (MCS). In particular, consistent joint VaR and ES loss functions within the MCS framework are used to adaptively combine forecasts generated by a wide range of parametric, semi-parametric, and non-parametric models. Our results reveal that the proposed combined predictors provide a suitable alternative for forecasting risk measures, passing the usual backtests, entering the set of superior models of the MCS, and usually exhibiting lower standard deviations than other model specifications.
The Theory of Intrinsic Time: A Primer
Authors: James B. Glattfelder, Richard B. Olsen
Date: 2024-06-11 00:00:00

The concept of time mostly plays a subordinate role in finance and economics. The assumption is that time flows continuously and that time series data should be analyzed at regular, equidistant intervals. Nonetheless, already nearly 60 years ago, the concept of an event-based measure of time was first introduced. This paper expands on this theme by discussing the paradigm of intrinsic time, its origins, history, and modern applications. Departing from traditional, continuous measures of time, intrinsic time proposes an event-based, algorithmic framework that captures the dynamic and fluctuating nature of real-world phenomena more accurately. Unsuspected implications arise in general for complex systems and specifically for financial markets. For instance, novel structures and regularities are revealed, otherwise obscured by any analysis utilizing equidistant time intervals. Of particular interest is the emergence of a multiplicity of scaling laws, a hallmark signature of an underlying organizational principle in complex systems. Moreover, a central insight from this novel paradigm is the realization that universal time does not exist; instead, time is observer-dependent, shaped by the intrinsic activity unfolding within complex systems. This research opens up new avenues for economic modeling and forecasting, paving the way for a deeper understanding of the invisible forces that guide the evolution and emergence of market dynamics and financial systems. An exciting and rich landscape of possibilities emerges within the paradigm of intrinsic time.
Investigating the price determinants of the European Emission Trading System: a non-parametric approach
Authors: Cristiano Salvagnin, Aldo Glielmo, Maria Elena De Giuli, Antonietta Mira
Date: 2024-06-07 00:00:00

The European carbon market plays a pivotal role in the European Union's ambitious target of achieving carbon neutrality by 2050. Understanding the intricacies of factors influencing European Union Emission Trading System (EU ETS) market prices is paramount for effective policy making and strategy implementation. We propose the use of the Information Imbalance, a recently introduced non-parametric measure quantifying the degree to which a set of variables is informative with respect to another one, to study the relationships among macroeconomic, economic, uncertainty, and energy variables concerning EU ETS prices. Our analysis shows that in Phase 3 commodity related variables such as the ERIX index are the most informative to explain the behaviour of the EU ETS market price. Transitioning to Phase 4, financial fluctuations take centre stage, with the uncertainty in the EUR/CHF exchange rate emerging as a crucial determinant. These results reflect the disruptive impacts of the COVID-19 pandemic and the energy crisis in reshaping the importance of the different variables. Beyond variable analysis, we also propose to leverage the Information Imbalance to address the problem of mixed-frequency forecasting, and we identify the weekly time scale as the most informative for predicting the EU ETS price. Finally, we show how the Information Imbalance can be effectively combined with Gaussian Process regression for efficient nowcasting and forecasting using very small sets of highly informative predictors.
Can market volumes reveal traders' rationality and a new risk premium?
Authors: Francesca Mariani, Maria Cristina Recchioni, Tai-Ho Wang, Roberto Giacalone
Date: 2024-06-09 00:00:00

An empirical analysis, suggested by optimal Merton dynamics, reveals some unexpected features of asset volumes. These features are connected to traders' belief and risk aversion. This paper proposes a trading strategy model in the optimal Merton framework that is representative of the collective behavior of heterogeneous rational traders. This model allows for the estimation of the average risk aversion of traders acting on a specific risky asset, while revealing the existence of a price of risk closely related to market price of risk and volume rate. The empirical analysis, conducted on real data, confirms the validity of the proposed model.
Utilizing Graph Generation for Enhanced Domain Adaptive Object Detection
Authors: Mu Wang
Date: 2024-04-23 00:00:00
Tasks: Domain Adaptation, Graph Generation, object-detection, Object Detection, Unsupervised Domain Adaptation, Variational Inference

The problem of Domain Adaptive in the field of Object Detection involves the transfer of object detection models from labeled source domains to unannotated target domains. Recent advancements in this field aim to address domain discrepancies by aligning pixel-pairs across domains within a non-Euclidean graphical space, thereby minimizing semantic distribution variance. Despite their remarkable achievements, these methods often use coarse semantic representations to model graphs, mainly due to ignoring non-informative elements and failing to focus on precise semantic alignment. Additionally, the generation of coarse graphs inherently introduces abnormal nodes, posing challenges and potentially biasing domain adaptation outcomes. Consequently, we propose a framework, which utilizes the Graph Generation to enhance the quality of DAOD (\method{}). Specifically, we introduce a Node Refinement module that utilizes a memory bank to reconstruct noisy sampled nodes while applying contrastive regularization to noisy features. To enhance semantic alignment, we propose separating domain-specific styles from category invariance encoded within graph covariances, which allows us to selectively remove domain-specific styles while preserving category-invariant information, thus facilitating more accurate semantic alignment across different domains. Furthermore, we propose a Graph Optimization adaptor, leveraging variational inference to mitigate the impact of abnormal nodes. Extensive experimentation across three adaptation benchmarks validates that \method{} achieves state-of-the-art performance in the task of unsupervised domain adaptation.
Interactive Generation of Laparoscopic Videos with Diffusion Models
Authors: Ivan Iliash, Simeon Allmendinger, Felix Meissen, Niklas Kühl, Daniel Rückert
Date: 2024-04-23 00:00:00
Tasks: Action Recognition

Generative AI, in general, and synthetic visual data generation, in specific, hold much promise for benefiting surgical training by providing photorealism to simulation environments. Current training methods primarily rely on reading materials and observing live surgeries, which can be time-consuming and impractical. In this work, we take a significant step towards improving the training process. Specifically, we use diffusion models in combination with a zero-shot video diffusion method to interactively generate realistic laparoscopic images and videos by specifying a surgical action through text and guiding the generation with tool positions through segmentation masks. We demonstrate the performance of our approach using the publicly available Cholec dataset family and evaluate the fidelity and factual correctness of our generated images using a surgical action recognition model as well as the pixel-wise F1-score for the spatial control of tool generation. We achieve an FID of 38.097 and an F1-score of 0.71.
Understanding attention-based encoder-decoder networks: a case study with chess scoresheet recognition
Authors: Sergio Y. Hayashi, Nina S. T. Hirata
Date: 2024-04-23 00:00:00
Tasks: Decoder, Diversity, Handwriting Recognition

Deep neural networks are largely used for complex prediction tasks. There is plenty of empirical evidence of their successful end-to-end training for a diversity of tasks. Success is often measured based solely on the final performance of the trained network, and explanations on when, why and how they work are less emphasized. In this paper we study encoder-decoder recurrent neural networks with attention mechanisms for the task of reading handwritten chess scoresheets. Rather than prediction performance, our concern is to better understand how learning occurs in these type of networks. We characterize the task in terms of three subtasks, namely input-output alignment, sequential pattern recognition, and handwriting recognition, and experimentally investigate which factors affect their learning. We identify competition, collaboration and dependence relations between the subtasks, and argue that such knowledge might help one to better balance factors to properly train a network.
Enhancing Presentation Slide Generation by LLMs with a Multi-Staged End-to-End Approach
Authors: Sambaran Bandyopadhyay, Himanshu Maheshwari, Anandhavelu Natarajan, Apoorv Saxena
Date: 2024-06-01 00:00:00

Generating presentation slides from a long document with multimodal elements such as text and images is an important task. This is time consuming and needs domain expertise if done manually. Existing approaches for generating a rich presentation from a document are often semi-automatic or only put a flat summary into the slides ignoring the importance of a good narrative. In this paper, we address this research gap by proposing a multi-staged end-to-end model which uses a combination of LLM and VLM. We have experimentally shown that compared to applying LLMs directly with state-of-the-art prompting, our proposed multi-staged solution is better in terms of automated metrics and human evaluation.
Enhancing Text Authenticity: A Novel Hybrid Approach for AI-Generated Text Detection
Authors: Ye Zhang, Qian Leng, Mengran Zhu, Rui Ding, Yue Wu, Jintong Song, Yulu Gong
Date: 2024-06-01 00:00:00
Tasks: Misinformation, Text Detection

The rapid advancement of Large Language Models (LLMs) has ushered in an era where AI-generated text is increasingly indistinguishable from human-generated content. Detecting AI-generated text has become imperative to combat misinformation, ensure content authenticity, and safeguard against malicious uses of AI. In this paper, we propose a novel hybrid approach that combines traditional TF-IDF techniques with advanced machine learning models, including Bayesian classifiers, Stochastic Gradient Descent (SGD), Categorical Gradient Boosting (CatBoost), and 12 instances of Deberta-v3-large models. Our approach aims to address the challenges associated with detecting AI-generated text by leveraging the strengths of both traditional feature extraction methods and state-of-the-art deep learning models. Through extensive experiments on a comprehensive dataset, we demonstrate the effectiveness of our proposed method in accurately distinguishing between human and AI-generated text. Our approach achieves superior performance compared to existing methods. This research contributes to the advancement of AI-generated text detection techniques and lays the foundation for developing robust solutions to mitigate the challenges posed by AI-generated content.
Harnessing Business and Media Insights with Large Language Models
Authors: Yujia Bao, Ankit Parag Shah, Neeru Narang, Jonathan Rivers, Rajeev Maksey, Lan Guan, Louise N. Barrere, Shelley Evenson, Rahul Basole, Connie Miao, Ankit Mehta, Fabien Boulay, Su Min Park, Natalie E. Pearson, Eldhose Joy, Tiger He, Sumiran Thakur, Koustav Ghosal, Josh On, Phoebe Morrison, Tim Major, Eva Siqi Wang, Gina Escobar, Jiaheng Wei, Tharindu Cyril Weerasooriya, Queena Song, Daria Lashkevich, Clare Chen, Gyuhak Kim, Dengpan Yin, Don Hejna, Mo Nomeli, Wei Wei
Date: 2024-06-02 00:00:00
Tasks: Data Visualization, Language Modeling, Language Modelling, Natural Language Queries

This paper introduces Fortune Analytics Language Model (FALM). FALM empowers users with direct access to comprehensive business analysis, including market trends, company performance metrics, and expert insights. Unlike generic LLMs, FALM leverages a curated knowledge base built from professional journalism, enabling it to deliver precise and in-depth answers to intricate business questions. Users can further leverage natural language queries to directly visualize financial data, generating insightful charts and graphs to understand trends across diverse business sectors clearly. FALM fosters user trust and ensures output accuracy through three novel methods: 1) Time-aware reasoning guarantees accurate event registration and prioritizes recent updates. 2) Thematic trend analysis explicitly examines topic evolution over time, providing insights into emerging business landscapes. 3) Content referencing and task decomposition enhance answer fidelity and data visualization accuracy. We conduct both automated and human evaluations, demonstrating FALM's significant performance improvements over baseline methods while prioritizing responsible AI practices. These benchmarks establish FALM as a cutting-edge LLM in the business and media domains, with exceptional accuracy and trustworthiness.