Sergio Focardi

@article{figa-talamanca_1403,

title = {Common dynamic factors for cryptocurrencies and multiple pair trading statistical arbitrages},

author = {Gianna Figà-Talamanca and Sergio Focardi},

url = {https://link.springer.com/article/10.1007/s10203-021-00318-x},

year  = {2021},

date = {2021-12-01},

journal = {Decisions in Economics and Finance},

volume = {44},

pages = {863-882},

abstract = {In this paper, we apply dynamic factor analysis to model the joint behaviour of Bitcoin, Ethereum, Litecoin and Monero, as a representative basket of the cryptocurrencies asset class. The empirical results suggest that the basket price is suitably described by a model with two dynamic factors. More precisely, we detect one integrated and one stationary factor until the end of August 2019 and two integrated factors afterwards. Based on this evidence, we define a multiple long-short trading strategy which proves profitable when the second factor is stationary.},

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@article{focardi_1198,

title = {Quantum Option Pricing and Quantum Finance},

author = {Sergio Focardi and Franck Fabozzi and Davide Mazza},

url = {https://jod.pm-research.com/content/early/2020/05/28/jod.2020.1.111.1},

year  = {2020},

date = {2020-09-01},

journal = {Journal Of Derivatives},

volume = {28},

number = {1},

pages = {79-98},

abstract = {In this article, the authors discuss the use of quantum probability, that is, the probability theory of quantum mechanics, for option pricing and for finance in general. The authors discuss the motivations for applying quantum probability to finance. The critical issues are replacing random variables with operators, self-reflexivity of markets, and the existence of incompatible observations. The authors outline quantum probability theory, quantum stochastic processes, and the pricing of options in a quantum context.},

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pubstate = {published},

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@article{fabozzi_1158,

title = {Climate Change and Asset Management},

author = {Franck Fabozzi and Sergio Focardi},

url = {https://jpm.pm-research.com/content/46/3/95/tab-article-info},

year  = {2020},

date = {2020-01-01},

journal = {Journal Of Portfolio Management},

volume = {46},

number = {3},

pages = {95-107},

abstract = {In this article, the authors explain how asset owners and asset managers should behave to cope with new regulations and risks related to climate change. By optimizing portfolios with constraints on the global portfolio carbon footprint, it is possible to construct equity portfolios and indexes with a low carbon footprint without penalizing returns. In the future, there will be costs and opportunities as a result of the process of transitioning to a low-carbon-emission economy. The authors explain how building future scenarios for assessing the climate consequences of more- or less- stringent actions and regulations will be challenging because doing so requires integrated assessment models that integrate climate science with economic data and predictions. According to the authors, bond investors offer more promise in forcing corporations to adopt policies to reduce carbon emissions than do equity investors by affecting funding costs. This can be done through carbon emission reduction covenants in corporate bond indentures and carbon policy performance bonds; the latter can be used to control government performance as well as corporate performance. On the financing side, green bonds can be used to fund carbon emission reduction projects.},

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@article{fabozzi_917,

title = {Modeling Local Trends with Regime Shifting Models with Time-Varying Probabilities},

author = {Franck Fabozzi and Sergio Focardi and Davide Mazza},

url = {https://www.sciencedirect.com/science/article/pii/S105752191830752X},

year  = {2019},

date = {2019-11-01},

journal = {International Review Of Financial Analysis},

volume = {66},

pages = {101368},

abstract = {In this paper we show that persistence and switching of trends are phenomena that appear in most long-lived stock return series. We model stock returns using a family of models based on hidden Markov models with duration-dependent transition probabilities. Trends are correlated so that aggregates such as indexes exhibit the same persistence and switching behavior as single stocks themselves. Hidden Markov models can thus explain medium-term momentum.},

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@article{focardi_37,

title = {Mathematics and Economics: Saving a Marriage on the Brink of Divorce?},

author = {Sergio Focardi and Franck Fabozzi},

url = {https://jpm.pm-research.com/content/42/4/1},

year  = {2016},

date = {2016-06-01},

journal = {Journal Of Portfolio Management},

volume = {42},

number = {4},

pages = {p1-p3},

abstract = {The marriage between economics and mathematics can (and must) be preserved, but much has to change. We advocate a serious ref lection on the use of mathematics in university curricula, and in the industry. On one hand, it should now be clear that mathematics other than calculus will likely be needed in economics and in the management of investments. But it should also be clear that students (and practitioners) must develop the habit of employing rigorous logical thinking, regardless of the level of approximation used in modeling reality.},

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@article{engle_35,

title = {Issues in Applying Financial Econometrics to Factor-Based Modeling in Investment Management},

author = {Robert Engle and Sergio Focardi and Franck Fabozzi},

url = {https://jpm.pm-research.com/content/42/5/94},

year  = {2016},

date = {2016-05-01},

journal = {Journal Of Portfolio Management},

volume = {42},

number = {5},

pages = {94-106},

abstract = {In finite markets such as stock markets, the problem of determining the true number of factors cannot be solved theoretically.},

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pubstate = {published},

tppubtype = {article}

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@article{focardi_36,

title = {A New Approach to Statistical Arbitrage: Strategies Based on Dynamic Factor Models of Prices and their Performance},

author = {Sergio Focardi and Franck Fabozzi},

url = {https://www.sciencedirect.com/science/article/abs/pii/S0378426615002824?via%3Dihub},

year  = {2016},

date = {2016-04-01},

journal = {Journal Of Banking & Finance},

volume = {65},

pages = {p134-p155},

abstract = {Statistical arbitrage strategies are typically based on models of returns. We introduce a new statistical arbitrage strategy based on dynamic factor models of prices. Our objective in this paper is to exploit the mean-reverting properties of prices reported in the literature. We do so because, to capture the same information using a return-based factor model, a much larger number of lags would be needed, leading to inaccurate parameter estimation.},

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pubstate = {published},

tppubtype = {article}

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@article{citovsky_347,

title = {A novel view of suprathreshold stochastic resonance and its applications to financial markets},

author = {Gui Citovsky and Sergio Focardi},

url = {https://www.frontiersin.org/articles/10.3389/fams.2015.00010/full},

year  = {2015},

date = {2015-10-01},

journal = {Frontiers in Applied Mathematics and Statistics},

abstract = {We introduce an original application of Suprathreshold Stochastic Resonance (SSR). Given a noise-corrupted signal, we induce SSR in effort to filter the effect of the corrupting noise. This will yield a clearer version of the signal we desire to detect. We propose a financial application that can help forecast returns generated by big orders. We assume there exist return signals that correspond to big orders, which are hidden by noise from small scale traders. We induce SSR in an attempt to reveal these return signals.},

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pubstate = {published},

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@article{focardi_337,

title = {Economics: An Empirical Science Capable of Forecasting Economic Events?},

author = {Sergio Focardi and Franck Fabozzi},

url = {https://jpm.pm-research.com/content/41/4/145},

year  = {2015},

date = {2015-07-01},

journal = {Journal Of Portfolio Management},

volume = {41},

pages = {145-151},

abstract = {Modern economies are complex systems that do not lend themselves to the conceptual simplification of mainstream general equilibrium theories. We only have partial knowledge of economic dynamics. Not all economic reasoning can be mathematically formalized with current tools. Many economic phenomena are simply too complex to be computed, although we can gain some knowledge through informal reasoning. Artificial economies might offer an important set of conceptual tools, but we must be careful not to fall in the same trap and believe that we can avoid empirical tests.},

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@article{focardi_346,

title = {Is economics an empirical science? If not, can it become one?},

author = {Sergio Focardi},

url = {https://www.frontiersin.org/articles/10.3389/fams.2015.00007/full},

year  = {2015},

date = {2015-07-01},

journal = {Frontiers in Applied Mathematics and Statistics},

abstract = {Today's mainstream economics, embodied in Dynamic Stochastic General Equilibrium (DSGE) models, cannot be considered an empirical science in the modern sense of the term: it is not based on empirical data, is not descriptive of the real-world economy, and has little forecasting power. In this paper, I begin with a review of the weaknesses of neoclassical economic theory and argue for a truly scientific theory based on data, the sine qua non of bringing economics into the realm of an empirical science. But I suggest that, before embarking on this endeavor, we first need to analyze the epistemological problems of economics to understand what research questions we can reasonably ask our theory to address. I then discuss new approaches which hold the promise of bringing economics closer to being an empirical science. Among the approaches discussed are the study of economies as complex systems, econometrics and econophysics, artificial economics made up of multiple interacting agents as well as attempts being made inside present main stream theory to more closely align the theory with the real world.},

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pubstate = {published},

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@article{focardi_422,

title = {Can We Predict Stock Market Crashes?},

author = {Sergio Focardi and Franck Fabozzi},

url = {https://jpm.pm-research.com/content/40/5/183},

year  = {2014},

date = {2014-09-01},

journal = {Journal Of Portfolio Management},

volume = {40},

number = {5},

pages = {183-195},

abstract = {In this article, the authors suggest how to think about a new framework for the analysis of financial bubbles and a possible vector of variables able to signal when an economy enters a state of disequilibrium. The working hypothesis is that market crashes are preceded by a bubble. The authors define a bubble as an anomalous increase in asset prices with respect to the economy. An exponentially growing spread between asset prices and the economy is therefore an indicator of the probability that a bubble is in the making. However, as the authors point out, this indicator alone is not sufficient as anomalous price growth can be generated by different macroeconomic scenarios. The authors discuss different macroscenarios that can lead to bubbles and the related indicators.},

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pubstate = {published},

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}