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Author: John Y. Campbell
Publisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272
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Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Author: John Y. Campbell
Publisher: OUP Oxford
ISBN: 019160691X
Category : Business & Economics
Languages : en
Pages : 272
Get Book Here
Book Description
Academic finance has had a remarkable impact on many financial services. Yet long-term investors have received curiously little guidance from academic financial economists. Mean-variance analysis, developed almost fifty years ago, has provided a basic paradigm for portfolio choice. This approach usefully emphasizes the ability of diversification to reduce risk, but it ignores several critically important factors. Most notably, the analysis is static; it assumes that investors care only about risks to wealth one period ahead. However, many investors—-both individuals and institutions such as charitable foundations or universities—-seek to finance a stream of consumption over a long lifetime. In addition, mean-variance analysis treats financial wealth in isolation from income. Long-term investors typically receive a stream of income and use it, along with financial wealth, to support their consumption. At the theoretical level, it is well understood that the solution to a long-term portfolio choice problem can be very different from the solution to a short-term problem. Long-term investors care about intertemporal shocks to investment opportunities and labor income as well as shocks to wealth itself, and they may use financial assets to hedge their intertemporal risks. This should be important in practice because there is a great deal of empirical evidence that investment opportunities—-both interest rates and risk premia on bonds and stocks—-vary through time. Yet this insight has had little influence on investment practice because it is hard to solve for optimal portfolios in intertemporal models. This book seeks to develop the intertemporal approach into an empirical paradigm that can compete with the standard mean-variance analysis. The book shows that long-term inflation-indexed bonds are the riskless asset for long-term investors, it explains the conditions under which stocks are safer assets for long-term than for short-term investors, and it shows how labor income influences portfolio choice. These results shed new light on the rules of thumb used by financial planners. The book explains recent advances in both analytical and numerical methods, and shows how they can be used to understand the portfolio choice problems of long-term investors.
Author: Elisa Luciano
Publisher: MDPI
ISBN: 3039216244
Category : Business & Economics
Languages : en
Pages : 224
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Book Description
Financial Risk Measurement is a challenging task, because both the types of risk and the techniques evolve very quickly. This book collects a number of novel contributions to the measurement of financial risk, which address either non-fully explored risks or risk takers, and does so in a wide variety of empirical contexts.
Author: Charles-albert Lehalle
Publisher: World Scientific
ISBN: 9813231149
Category : Business & Economics
Languages : en
Pages : 366
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Book Description
This book exposes and comments on the consequences of Reg NMS and MiFID on market microstructure. It covers changes in market design, electronic trading, and investor and trader behaviors. The emergence of high frequency trading and critical events like the'Flash Crash' of 2010 are also analyzed in depth.Using a quantitative viewpoint, this book explains how an attrition of liquidity and regulatory changes can impact the whole microstructure of financial markets. A mathematical Appendix details the quantitative tools and indicators used through the book, allowing the reader to go further independently.This book is written by practitioners and theoretical experts and covers practical aspects (like the optimal infrastructure needed to trade electronically in modern markets) and abstract analyses (like the use on entropy measurements to understand the progress of market fragmentation).As market microstructure is a recent academic field, students will benefit from the book's overview of the current state of microstructure and will use the Appendix to understand important methodologies. Policy makers and regulators will use this book to access theoretical analyses on real cases. For readers who are practitioners, this book delivers data analysis and basic processes like the designs of Smart Order Routing and trade scheduling algorithms.In this second edition, the authors have added a large section on orderbook dynamics, showing how liquidity can predict future price moves, and how High Frequency Traders can profit from it. The section on market impact has also been updated to show how buying or selling pressure moves prices not only for a few hours, but even for days, and how prices relax (or not) after a period of intense pressure.Further, this edition includes pages on Dark Pools, Circuit Breakers and added information outside of Equity Trading, because MiFID 2 is likely to push fixed income markets towards more electronification. The authors explore what is to be expected from this change in microstructure. The appendix has also been augmented to include the propagator models (for intraday price impact), a simple version of Kyle's model (1985) for daily market impact, and a more sophisticated optimal trading framework, to support the design of trading algorithms.
Author: Riccardo Rebonato
Publisher: John Wiley & Sons
ISBN: 0470091401
Category : Business & Economics
Languages : en
Pages : 864
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Book Description
In Volatility and Correlation 2nd edition: The Perfect Hedger and the Fox, Rebonato looks at derivatives pricing from the angle of volatility and correlation. With both practical and theoretical applications, this is a thorough update of the highly successful Volatility & Correlation – with over 80% new or fully reworked material and is a must have both for practitioners and for students. The new and updated material includes a critical examination of the ‘perfect-replication’ approach to derivatives pricing, with special attention given to exotic options; a thorough analysis of the role of quadratic variation in derivatives pricing and hedging; a discussion of the informational efficiency of markets in commonly-used calibration and hedging practices. Treatment of new models including Variance Gamma, displaced diffusion, stochastic volatility for interest-rate smiles and equity/FX options. The book is split into four parts. Part I deals with a Black world without smiles, sets out the author’s ‘philosophical’ approach and covers deterministic volatility. Part II looks at smiles in equity and FX worlds. It begins with a review of relevant empirical information about smiles, and provides coverage of local-stochastic-volatility, general-stochastic-volatility, jump-diffusion and Variance-Gamma processes. Part II concludes with an important chapter that discusses if and to what extent one can dispense with an explicit specification of a model, and can directly prescribe the dynamics of the smile surface. Part III focusses on interest rates when the volatility is deterministic. Part IV extends this setting in order to account for smiles in a financially motivated and computationally tractable manner. In this final part the author deals with CEV processes, with diffusive stochastic volatility and with Markov-chain processes. Praise for the First Edition: “In this book, Dr Rebonato brings his penetrating eye to bear on option pricing and hedging.... The book is a must-read for those who already know the basics of options and are looking for an edge in applying the more sophisticated approaches that have recently been developed.” —Professor Ian Cooper, London Business School “Volatility and correlation are at the very core of all option pricing and hedging. In this book, Riccardo Rebonato presents the subject in his characteristically elegant and simple fashion...A rare combination of intellectual insight and practical common sense.” —Anthony Neuberger, London Business School
Author: Robert A. Meyers
Publisher: Springer Science & Business Media
ISBN: 1441977007
Category : Business & Economics
Languages : en
Pages : 919
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Book Description
Finance, Econometrics and System Dynamics presents an overview of the concepts and tools for analyzing complex systems in a wide range of fields. The text integrates complexity with deterministic equations and concepts from real world examples, and appeals to a broad audience.
Author: Robert J Elliott
Publisher: Springer Science & Business Media
ISBN: 0387848541
Category : Science
Languages : en
Pages : 374
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Book Description
As more applications are found, interest in Hidden Markov Models continues to grow. Following comments and feedback from colleagues, students and other working with Hidden Markov Models the corrected 3rd printing of this volume contains clarifications, improvements and some new material, including results on smoothing for linear Gaussian dynamics. In Chapter 2 the derivation of the basic filters related to the Markov chain are each presented explicitly, rather than as special cases of one general filter. Furthermore, equations for smoothed estimates are given. The dynamics for the Kalman filter are derived as special cases of the authors’ general results and new expressions for a Kalman smoother are given. The Chapters on the control of Hidden Markov Chains are expanded and clarified. The revised Chapter 4 includes state estimation for discrete time Markov processes and Chapter 12 has a new section on robust control.
Author: Lakhdar Aggoun
Publisher: Cambridge University Press
ISBN: 9781139456241
Category : Mathematics
Languages : en
Pages : 274
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Book Description
The estimation of noisily observed states from a sequence of data has traditionally incorporated ideas from Hilbert spaces and calculus-based probability theory. As conditional expectation is the key concept, the correct setting for filtering theory is that of a probability space. Graduate engineers, mathematicians and those working in quantitative finance wishing to use filtering techniques will find in the first half of this book an accessible introduction to measure theory, stochastic calculus, and stochastic processes, with particular emphasis on martingales and Brownian motion. Exercises are included. The book then provides an excellent users' guide to filtering: basic theory is followed by a thorough treatment of Kalman filtering, including recent results which extend the Kalman filter to provide parameter estimates. These ideas are then applied to problems arising in finance, genetics and population modelling in three separate chapters, making this a comprehensive resource for both practitioners and researchers.
Author: Vasant Naik
Publisher: CFA Institute Research Foundation
ISBN: 1944960155
Category : Business & Economics
Languages : en
Pages : 192
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Book Description
Author:
Publisher:
ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 620
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Book Description
Abstracts of dissertations available on microfilm or as xerographic reproductions.
Author: Samuel N. Cohen
Publisher: Birkhäuser
ISBN: 1493928678
Category : Mathematics
Languages : en
Pages : 673
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Book Description
Completely revised and greatly expanded, the new edition of this text takes readers who have been exposed to only basic courses in analysis through the modern general theory of random processes and stochastic integrals as used by systems theorists, electronic engineers and, more recently, those working in quantitative and mathematical finance. Building upon the original release of this title, this text will be of great interest to research mathematicians and graduate students working in those fields, as well as quants in the finance industry. New features of this edition include: End of chapter exercises; New chapters on basic measure theory and Backward SDEs; Reworked proofs, examples and explanatory material; Increased focus on motivating the mathematics; Extensive topical index. "Such a self-contained and complete exposition of stochastic calculus and applications fills an existing gap in the literature. The book can be recommended for first-year graduate studies. It will be useful for all who intend to work with stochastic calculus as well as with its applications."–Zentralblatt (from review of the First Edition)
