Submitted by Salome Lema (salome.lema@hec.edu) on 2016-11-24T07:36:33Z No. of bitstreams: 1 20161102_Salome_Lema_Thesis - vf.pdf: 1739716 bytes, checksum: 9e2585c7ecc0b8105afd91779c254775 (MD5) / Approved for entry into archive by Josineide da Silva Santos Locatelli (josineide.locatelli@fgv.br) on 2016-11-24T10:16:30Z (GMT) No. of bitstreams: 1 20161102_Salome_Lema_Thesis - vf.pdf: 1739716 bytes, checksum: 9e2585c7ecc0b8105afd91779c254775 (MD5) / Made available in DSpace on 2016-11-24T11:16:37Z (GMT). No. of bitstreams: 1 20161102_Salome_Lema_Thesis - vf.pdf: 1739716 bytes, checksum: 9e2585c7ecc0b8105afd91779c254775 (MD5) Previous issue date: 2016-11-24 / In August 2011, the Brazilian government taxed short positions in the foreign exchange (FX) derivative market in order to weaken the surge of post-crisis capital inflow, discourage carry trade strategies on the Real and avoid further local currency appreciation. Nevertheless, nonfinancial firms are also end-users of derivatives and might have suffered in case financial institutions transfer the regulatory cost to their clients in the real economy. To the extent that this tax increases the cost of hedging, firms may decide to hedge less, causing an increase in their exposure to currency risk. This paper aims at analysing if this regulatory change had an impact on Brazilian non-financial firms FX exposure, measured by the sensitivity of stock prices to currency fluctuation (FX-Beta). Therefore, it seeks to compare the FX beta of Brazilian non-financial listed firms before and after the implementation of the measure, to assess their degree of exposure to currency risk. In accordance with an increasing cost of hedging for those companies, results show that the beta difference also reached a riskier level. / Em agosto de 2011, o governo brasileiro passou a tributar posições vendidas no mercado de derivativos cambiais para diminuir o influxo de capital estrangeiro no pós-crise, desencorajar operações de carry trade e evitar que o real continuasse a se valorizar frente ao dólar. No entanto, empresas não financeiras também são usuárias de derivativos, e podem ter tido seus custos de proteção cambial aumentados, caso as instituições financeiras tenham transferido esse custo adicional para seus clientes na economia real. Na medida em que o tributo aumenta o custo de fazer proteção cambial com derivativos, as empresas podem ter decidido proteger uma parcela menor de sua exposição, causando um aumento em sua exposição cambial. Essa dissertação analisa se essa mudança regulatória teve um impacto na exposição cambial das empresas não financeiras, medida pela sensibilidade do preço das ações às variações cambiais (FX-Beta). Assim, o estudo compara os FX-Betas das empresas brasileiras antes e depois da implementação do tributo, para medir o grau de mudança em suas exposições cambiais. Em linha com o aumento no custo do hedge para essas empresas, os resultados mostram alguma evidência de que algumas empresas se tornaram mais expostas ao câmbio.

As últimas quatro décadas foram importantes para o desenvolvimento da malha rodoviária brasileira. O sistema de rodovias do país recebeu incentivos financeiros à sua expansão e diversas soluções estruturais para pontes e viadutos foram criadas a fim de atender à demanda de infraestrutura. Em contrapartida, a carência de programas de manutenção preventiva tem causado um crescimento significativo no número de estruturas desse tipo que se encontra em estágio avançado de deterioração. Dessa maneira, esta dissertação propõe um plano de monitoramento de curta duração para monitorar o comportamento estrutural de uma ponte rodoviária curva de concreto armado já em serviço. A partir da revisão do estado-da-arte no assunto, são apresentados os tipos de monitoramento, as possíveis grandezas a serem monitoradas e as ferramentas para medi-las, assim como suas vantagens e desvantagens. A fim de avaliar estruturalmente o comportamento da ponte e auxiliar no plano de monitoramento, uma hierarquia de seis modelos numéricos é desenvolvida. Então, o plano de monitoramento proposto é aplicado na ponte sob estudo para aquisição de dados, que são posteriormente tratados e confrontados com os dois modelos numéricos mais complexos da hierarquia em um processo de análise e calibração desses modelos. Dessa análise, é possível mostrar a representatividade dos modelos desenvolvidos e a relação entre complexidade do modelo, número de parâmetros adotados para a representatividade da estrutura e convergência de resposta. / The last four decades were important for the development of the Brazilian highway system. Investments were made on the expansion of highways and many structural solutions for bridges and viaducts were developed in order to attend the countrys demand. In contrast, the lack of preventive maintenance programmes has caused a significant increase in the number of those structures found in advanced deterioration stage. Thus, this thesis aims to suggest a short-term monitoring plan to monitor the structural behaviour of a curved highway concrete bridge in service. From studies on state-of-the-art in monitoring, it is presented its types, magnitudes and tools to measure them structures, as well as their advantages and disadvantages. In order to assess the structural behaviour of the bridge and support the monitoring plan, a hierarchy of six numerical models is developed. Then, the proposed monitoring plan is applied to the bridge under study for data acquisition. Afterwards, this data is processed and compared with the two more complex numerical models of the hierarchy in a process of analysis and calibration of these models. From this analysis, it is possible to show the representativeness of the developed models and the relationship between model complexity, number of parameters and convergence.

Neste trabalho estudamos diferentes variantes dos modelos GARCH quando consideramos a chegada da informação heterogênea sob a forma de dados de alta freqüência. Este tipo de modelos, conhecidos como HARCH(n), foram introduzidos por Muller et al. (1997). Para entender a necessidade de incorporar esta característica da heterogeneidade da informação, estudamos o problema da agregação temporal para processos GARCH e a modelagem destes em dados de alta freqüência e veremos quais são as desvantagens destes modelos e o porquê da necessidade de corrigi-lo. Propusemos um novo modelo que leva em conta a heterogeneidade da informação do mercado financeiro e a memória longa da volatilidade, generalizando assim o modelo proposto por Müller et al.(1997), e estudamos algumas das propriedades teóricas do modelo proposto. Utilizamos estimação via máxima verossimilhança e amostrador de Griddy-Gibbs, e para avaliar o desempenho destes métodos realizamos diversas simulações. Também fizemos aplicações a duas séries de alta freqüência, a taxa de câmbio Euro- Dólar e o índice Ibovespa. Uma modificação ao algoritmo de Griddy-Gibbs foi proposta, para ter uma janela móvel de pontos, para a estimação das distribuições condicionais, a cada iteração. Este procedimento foi validado pela proximidade das estimações com a técnica de máxima verossimilhança. Disponibilizaremos algumas bibliotecas para o pacote S-Plus em que as análises descritas neste trabalho poderão ser reproduzidas. Informações relativas a tais bibliotecas estarão disponíveis na página Web http://www.ime.usp.br/~ruilova. / In this work we study different variants of GARCH models to analyze the arrival of heterogeneous information in high frequency data. These models, known as HARCH(*n*) models, were introduced by Müller et al.(1997). To understand the necessity to incorporate this characteristic, heterogeneous information, we study temporal aggregation on GARCH processes for high frequency data, and show some problems in the application of these models and the reason why it is necessary to develop new models. We propose a new model, that incorporates the heterogeneous information present in the financial market and the long memory of the volatility, generalizing the model considered by Müller et al.(1997). We propose to estimate the model via maximum likelihood and Griddy-Gibbs sampler. To assess the performance of the suggested estimation procedures we perform some simulations and apply the methodology to two time series, namely the foreign exchange rate Euro-Dollar and the series of the Ibovespa index. A modification of the algorithm of Griddy-Gibbs sampler was proposed to have a grid of points in a mobile window, to estimate the condicional distributions, in each iteration. This was validated by the similar results between maximum likelihood and Griddy-Gibbs sampler estimates obtained. We implemented the methods described in this work creating some libraries for the SPlus package. Information concerning these libraries is available in the Web page http://www.ime.usp.br/~ruilova.

This diploma thesis is committed to examination of validity of Harmonic Patterns in Forex trading. Scott Carney described existing and introduced new Harmonic Patterns in 1999 in his book Harmonic Trader. These patterns use the Fibonacci principle to analyze price action and to provide both bullish and bearish trading signals. The goal of this thesis is to find out whether harmonic trading strategy on selected pairs is profitable in FX market, which patterns are the most profitable and what is the success rate for the signals they provide.

Reinforcement Learning has applications in various domains, but the typical assumption is of a stationary process. Hence, when this hypothesis does not hold, performance may be sub-optimal. Tackling non-stationarity is not a trivial task because it requires adaptation to changing environments and predictability in various conditions, as dynamics and rewards might change over time. Meta Reinforcement Learning has been used to handle the non-stationary evolution of the environment while knowing the potential source of noise in the system. However, our research presents a novel method to manage such complexity by learning a suitable latent representation that captures relevant patterns for decision-making, improving the policy optimization procedure. We present a two-step framework that combines the unsupervised training of Deep Variational Auto-encoders to extract latent variables and a state-of-the-art model-free and off-policy Batch Reinforcement Learning algorithm called Fitted Q-Iteration, without relying on any assumptions about the environment dynamics. This framework is named Latent-Variable Fitted Q-Iteration (LV-FQI). Furthermore, to validate the generalization and robustness capabilities for exploiting the structure of the temporal sequence of time-series data and extracting near-optimal policies, we evaluated the performance with empirical experiments on synthetic data generated from classical financial models. We also tested it on Foreign Exchange trading scenarios with various degrees of non-stationarity and low signal-to-noise ratios. The results showed performance improvements compared to existing algorithms, indicating great promise for addressing the long-standing challenges of Continual Reinforcement Learning. / Reinforcement Learning har tillämpningar inom olika områden, men den typiska antagningen är att det rör sig om en stationär process. När detta antagande inte stämmer kan prestationen bli suboptimal. Att hantera icke-stationaritet är ingen enkel uppgift eftersom det kräver anpassning till föränderliga miljöer och förutsägbarhet under olika förhållanden, då dynamiken och belöningarna kan förändras över tiden. Meta Reinforcement Learning har använts för att hantera den icke-stationära utvecklingen av miljön genom att känna till potentiella källor till brus i systemet. Vår forskning presenterar emellertid en ny metod för att hantera en sådan komplexitet genom att lära en lämplig latent representation som fångar relevanta mönster för beslutsfattande och förbättrar optimeringsprocessen för policyn. Vi presenterar en tvåstegsramverk som kombinerar osuperviserad träning av Deep Variational Auto-encoders för att extrahera latenta variabler och en state-of-the-art model-free och off-policy Batch Reinforcement Learning-algoritm, Fitted Q-Iteration, utan att förlita sig på några antaganden om miljöns dynamik. Detta ramverk kallas Latent-Variable Fitted Q-Iteration (LV-FQI). För att validera generaliserings- och robusthetsförmågan att utnyttja strukturen hos den tidsmässiga sekvensen av tidsseriedata och extrahera nära-optimala policys utvärderade vi prestandan med empiriska experiment på syntetiska data genererade från klassiska finansiella modeller. Vi testade också det på handelsscenario för Foreign Exchange med olika grader av icke-stationaritet och låg signal-till-brus-förhållande. Resultaten visade prestandaförbättringar jämfört med befintliga algoritmer och indikerar stor potential för att tackla de långvariga utmaningarna inom kontinuerlig Reinforcement Learning.

In this paper, I will cover the step by step process of making my thesis film, Dantalion. These steps include writing, directing, production design, makeup, cinematography, editing, and sound. I will primarily focus on the pre-production work done for each one of these departments and how it affected the outcome of the finished film. I will then evaluate the outcome to determine the success of the project.

This thesis applies entropy as a model independent measure to address research questions concerning the dynamics of various financial time series. The thesis consists of three main studies as presented in chapters 3, 4 and 5. Chapters 3 and 4 apply an entropy measure to conduct a bivariate analysis of drawdowns and drawups in foreign exchange rates. Chapter 5 investigates the dynamics of investment strategies of hedge funds using entropy of realised volatility in a conditioning model. In all three studies, methods from information theory are applied in novel ways to financial time series. As Information Theory and its central concept of entropy are not widely used in the economic sciences, a methodology chapter was therefore included in chapter 2 that gives an overview on the theoretical background and statistical features of the entropy measures used in the three main studies. In the first two studies the focus is on mutual information and transfer entropy. Both measures are used to identify dependencies between two exchange rates. The chosen measures generalise, in a well defined manner, correlation and Granger causality. A different entropy measure, the approximate entropy, is used in the third study to analyse the serial structure of S&P realised volatility. The study of drawdowns and drawups has so far been concentrated on their uni- variate characteristics. Encoding the drawdown information of a time series into a time series of discrete values, Chapter 3 uses entropy measures to analyse the correlation and cross correlations of drawdowns and drawups. The method to encode the drawdown information is explained and applied to daily and hourly EUR/USD and GBP/USD exchange rates from 2001 to 2012. For the daily series, we find evidence of dependence among the largest draws (i.e. 5% and 95% quantiles), but it is not as strong as the correlation between the daily returns of the same pair of FX rates. There is also dependence between lead/lagged values of these draws. Similar and stronger findings were found among the hourly data. We further use transfer entropy to examine the spill over and lead-lag information flow between drawup/drawdown of the two exchange rates. Such information flow is indeed detectable in both daily and hourly data. The amount of information transferred is considerably higher for the hourly than the daily data. Both daily and hourly series show clear evidence of information flowing from EUR/USD to GBP/USD and, slightly stronger, in the reverse direction. Robustness tests, using effective transfer entropy, show that the information measured is not due to noise. Chapter 4 uses state space models of volatility to investigate volatility spill overs between exchange rates. Our use of entropy related measures in the investigation of dependencies of two state space series is novel. A set of five daily exchange rates from emerging and developed economies against the dollar over the period 1999 to 2012 is used. We find that among the currency pairs, the co-movement of EUR/USD and CHF/USD volatility states show the strongest observed relationship. With the use of transfer entropy, we find evidence for information flows between the volatility state series of AUD, CAD and BRL.Chapter 5 uses the entropy of S&P realised volatility in detecting changes of volatility regime in order to re-examine the theme of market volatility timing of hedge funds. A one-factor model is used, conditioned on information about the entropy of market volatility, to measure the dynamic of hedge funds equity exposure. On a cross section of around 2500 hedge funds with a focus on the US equity markets we find that, over the period from 2000 to 2014, hedge funds adjust their exposure dynamically in response to changes in volatility regime. This adds to the literature on the volatility timing behaviour of hedge fund manager, but using entropy as a model independent measure of volatility regime. Finally, chapter 6 summarises and concludes with some suggestions for future research.

This thesis deals with the Forex and trading on it. The aim of this work is to evaluate the possibility of trading primarily for retail investors, for which this financial market is becoming increasingly popular. In the first two chapters, Forex, its characteristic and information about trading are presented. In the next chapter, analysis of exchange rate development is described , both fundamental and technical. More attention is paid to technical analysis. The demonstration of application of technical analysis is presented. The last chapter deals with comparing the selected trading platforms in terms of availability, technical analysis and trading opportunities.

The paper reacts to tremendous increase in popularity of FX trading among retail investors in recent years, caused mainly by easy accessibility through numerous online trading platforms and dramatic fall in trading costs. One of the accompanying trends along with increasing trading speed is a departure from fundamental analysis and shift towards more technical approach. In reaction to that, the paper aims to review the most popular technical trading rules and puts the findings in contrast with existing empirical literature and efficient market hypothesis. Although being far from discovering an ultimate trading formula, the paper concludes that selected trading strategies do demonstrate a certain degree of predictability of future exchange rate movements.

In this thesis we develop and test a new method for interpolating and extrapolating prices of European options. The theoretical base originates from the local variance gamma model developed by Carr (2008), in which the local volatility model by Dupire (1994) is combined with the variance gamma model by Madan and Seneta (1990). By solving a simplied version of the Dupire equation under the assumption of a continuous ve parameter di usion term, we derive a parameterization dened for strikes in an interval of arbitrary size. The parameterization produces positive option prices which satisfy both conditions for absence of arbitrage in a one maturity setting, i.e. all adjacent vertical spreads and buttery spreads are priced non-negatively. The method is implemented and tested in the FX-option market. We suggest two sub-models, one with three and one with ve degrees of freedom. By using a least-square approach, we calibrate the two sub-models against 416 Reuters quoted volatility smiles. Both sub-models succeeds in generating prices within the bid-ask spread for all options in the sample. Compared to the three parameter model, the model with ve parameters calibrates more exactly to market quoted mids but has a longer calibration time. The three parameter model calibrates remarkably quickly; in a MATLAB implementation using a Levenberg-Marquardt algorithm the average calibration time is approximately 1 ms. Both sub-models produce volatility smiles which are C2 and well-behaving. Further, we suggest a technique allowing for arbitrage-free interpolation of calibrated option price functions in the maturity dimension. The interpolation is performed in parameter space, where every set of parameters uniquely determines an option price function. Furthermore, we produce sucient conditions to ensure absence of calendar spread arbitrage when calibrating the proposed model to several maturities. We use this technique to produce implied volatility surfaces which are suciently smooth, satisfy all conditions for absence of arbitrage and fit market quoted volatility surfaces within the bid-ask spread. In the final chapter we use the results for producing Dupire local volatility surfaces and for pricing variance swaps.