Sep
23
Andy from QuantNet kindly reminded me that the 2011 Financial Engineering Ranking has come out, as stated on the webpage,For those of you interested in studying for a master in Financial Engineering, take a look at http://www.quantnet.com/mfe-programs-rankings/. Besides Financial Engineering Ranking, it lists the tuition and length of each program.
Surprisingly or not, the top 5 MFE programs are:
1 Carnegie Mellon University
2 Princeton University
3 Columbia University
4 New York University
5 Baruch College, City University of New York
Quotation
The 2011 Quantnet ranking is the most comprehensive ranking to date of master programs in Financial Engineering (MFE), Mathematical Finance in North America. Quantnet surveyed program administrators, hiring managers to get the information used in the 2011 ranking.
Surprisingly or not, the top 5 MFE programs are:
1 Carnegie Mellon University
2 Princeton University
3 Columbia University
4 New York University
5 Baruch College, City University of New York
Sep
22
Statistics and Finance: An Introduction is a useful book emphasizing the applications of statistics and probability to finance, such as regression, ARMA and GARCH models, the bootstrapping, and nonparametric regression using splines. For an easier learning and application, the author also public the R codes and examples at http://www.stat.tamu.edu/~ljin/Finance/stat689-R.htm.
Possible interesting sections:
Fig 2.11 & R Code: Comparison on normal and heavy-tailed distributions.
Fig 2.12 & R Code: Survival function of a Pareto distribution with c=0.25 and a=1.1 and of normal and exp distribution on being greater than 0.25.
Fig4.1 & R Code: Autocorrelation functions of AR(1) processes with r equal to 0.95 , 0.75,0.2 and -0.9
Fig4.2 & R Code: Simulations of 200 Observations from AR(1) processes with various parameters. The white noise process is the same for all four AR(1) Processes.
Fig4.7 & R Code: Time series plot of the 3 month Treasury bill rates, plot of first differences, and ACFs. The data set contains monthly values of the 3 month rates from Jan 1950 until Mar 1996.
Model Fit Examples R Codes: Fit GE Daily log return using AR(1),AR(6), MA(2), ARMA(2,1) and log price using ARIMA(2,1,0) Model
Fig4.9 & R Code: Time series plot of the daily GE log Prices with forecasts from an ARIMA(1,1,0) Model.
Fig5.3 & R Code: Expected frontier and tangency portfolio with different r.
Fig5.4 : Efficient frontier (solid) plotted for N=3 assets.
Tangency portfolio with the constraints R Code:
R Code Volatility smiles and polynomial regressionpage 283-284
Fig 8.15: Ratio of Log Return on a call to log return on the underlying stock. Page 291.
Fig 9.4 : Polynomial and spline estimates of forward rates of U.S. Treasury bonds.
Fig 10.5 : Actual efficient frontier for the sample (optimal) and bootstrap efficient frontier (achieved) for each of six bootstrap resamples.
Fig 10.6: Results from 400 bootstrap resamples. For each resample, the efficient portfolio with a mean return of 0.012 is estimated. In the upper subplot, the actual mean return and standard deviation of the return are plotted as a small dot. The large dot is the point on the efficient frontier with mean return of 0.012.
Model Fit:
** R Code: GARCH Model Fit, Page 373.
Possible interesting sections:
Fig 2.11 & R Code: Comparison on normal and heavy-tailed distributions.
Fig 2.12 & R Code: Survival function of a Pareto distribution with c=0.25 and a=1.1 and of normal and exp distribution on being greater than 0.25.
Fig4.1 & R Code: Autocorrelation functions of AR(1) processes with r equal to 0.95 , 0.75,0.2 and -0.9
Fig4.2 & R Code: Simulations of 200 Observations from AR(1) processes with various parameters. The white noise process is the same for all four AR(1) Processes.
Fig4.7 & R Code: Time series plot of the 3 month Treasury bill rates, plot of first differences, and ACFs. The data set contains monthly values of the 3 month rates from Jan 1950 until Mar 1996.
Model Fit Examples R Codes: Fit GE Daily log return using AR(1),AR(6), MA(2), ARMA(2,1) and log price using ARIMA(2,1,0) Model
Fig4.9 & R Code: Time series plot of the daily GE log Prices with forecasts from an ARIMA(1,1,0) Model.
Fig5.3 & R Code: Expected frontier and tangency portfolio with different r.
Fig5.4 : Efficient frontier (solid) plotted for N=3 assets.
Tangency portfolio with the constraints R Code:
R Code Volatility smiles and polynomial regressionpage 283-284
Fig 8.15: Ratio of Log Return on a call to log return on the underlying stock. Page 291.
Fig 9.4 : Polynomial and spline estimates of forward rates of U.S. Treasury bonds.
Fig 10.5 : Actual efficient frontier for the sample (optimal) and bootstrap efficient frontier (achieved) for each of six bootstrap resamples.
Fig 10.6: Results from 400 bootstrap resamples. For each resample, the efficient portfolio with a mean return of 0.012 is estimated. In the upper subplot, the actual mean return and standard deviation of the return are plotted as a small dot. The large dot is the point on the efficient frontier with mean return of 0.012.
Model Fit:
** R Code: GARCH Model Fit, Page 373.
Sep
19
A nice paper by Chang, C.-C., Chou, P.-H. and Liao, T.-H. (2011), Fitting and testing for the implied volatility curve using parametric models. published in Journal of Futures Markets.
Read the paper at http://onlinelibrary.wiley.com/doi/10.1002/fut.20549/abstract.
Quotation
Numerous issues have arisen over the past few decades relating to the implied volatility smile in the options market; however, the extant literature reveals that relatively little effort has thus far been placed into comparing the various implied volatility models, essentially as a result of the lack of any theoretical foundation on which to base such comparative analysis. In this study, we use a comprehensive options database and employ methods of combining the various hypothesis tests to compare the different implied volatility models. To the best of our knowledge, this is the first study of its kind to address this issue using combination tests. Our empirical results reveal that the linear piecewise model is the most appropriate model for capturing the implied volatility smile, with additional robustness checks confirming the validity of this finding.
Read the paper at http://onlinelibrary.wiley.com/doi/10.1002/fut.20549/abstract.
Sep
13
If you have spent any time following the story playing out in Europe you know that many of the Eurozone countries are experiencing the same crisis that the United States went through in 2009. If we strip away all of the economic and political chatter, the story is simply this: Because of a whole lot of bad financial decisions, many Eurozone countries are on the brink of disaster and no country is closer to financial Armageddon than Greece.
Still, although Greece is essentially bankrupt, Americans in large numbers have no idea the tragedy that continues to unfold in this small country. Why is Greece in this position, what happens if they default on their debts, and what can we learn from these events?
The Story
The story is full or drama and history but much of the problem comes from the fact that Greece hasn’t done a good job of taxing its citizens. The New York Times reports that Greece has allowed large amounts of citizens and companies to evade their tax liabilities. The same report says that if these taxes were collected, Greece would be able to meet much of their liabilities but suddenly raising taxes on their citizens isn’t practical either. Others note that in Greece’s own budget, government spending now exceeds 50% of GDP, the total value of all goods and service sold in the country.
This means that half of the total production of goods and services funds current spending. The rest of the budget, which includes a lot of uncollected revenue, pays on the debt but it’s not nearly enough. The European Central Bank has been left with the task of paying for Greek debt which is mounting fast largely because the interest rates they have to pay to borrow money is so high. Recently the interest rate Greece has to pay has passed 50%. Eurozone countries no longer want to let Greece borrow money so they are left to pay their debt with money they don’t have.
Still, although Greece is essentially bankrupt, Americans in large numbers have no idea the tragedy that continues to unfold in this small country. Why is Greece in this position, what happens if they default on their debts, and what can we learn from these events?The Story
The story is full or drama and history but much of the problem comes from the fact that Greece hasn’t done a good job of taxing its citizens. The New York Times reports that Greece has allowed large amounts of citizens and companies to evade their tax liabilities. The same report says that if these taxes were collected, Greece would be able to meet much of their liabilities but suddenly raising taxes on their citizens isn’t practical either. Others note that in Greece’s own budget, government spending now exceeds 50% of GDP, the total value of all goods and service sold in the country.
This means that half of the total production of goods and services funds current spending. The rest of the budget, which includes a lot of uncollected revenue, pays on the debt but it’s not nearly enough. The European Central Bank has been left with the task of paying for Greek debt which is mounting fast largely because the interest rates they have to pay to borrow money is so high. Recently the interest rate Greece has to pay has passed 50%. Eurozone countries no longer want to let Greece borrow money so they are left to pay their debt with money they don’t have.
Sep
12
Read a post from World Beta and forward here in case you are interested. The National Association of Active Investment Managers (NAAIM) sponsors the Wagner Award annually to call for papers of academic quality that cover an innovative topic in the area of active investing. $10,000 to be awarded for Best Paper, and $3,000 and $1,000 for 2nd and 3rd ranked paper.
Paper Topics: The papers should cover an innovative topic in the area of active investing. This can be either a documented and justified investing approach or an exploration into the validity of active investing. Active investing topics can involve making investment decisions using technical analysis, quantitative analysis, etc. Papers can also address related topics such as position sizing techniques, money management approaches, scaling into and out of trades, exit strategies, etc.
Selection Criteria: Papers must be of practical significance to practitioners of active investing. The prize will be awarded to a paper resulting from research into active investment management, which NAAIM broadly defines as investment strategies and techniques that improve upon the risk-adjusted return obtainable from a passive, buy-and-hold, investment strategy. Many NAAIM members strive for consistent outperformance and focus on quantitatively or technically oriented investing. However papers that explore other types of active investment management or explore combining one or more types of active investment management will also be considered.
Prizes: Three prizes will be awarded. The best paper will receive the Wagner Award valued at $10,000; second place will receive $3,000 and third will receive $1,000. Honorable mentions or additional monetary prizes may be awarded at the judges’ discretion. In addition, the grand prizewinner will be invited to present his / her paper at the NAAIM annual conference: “NAAIM Uncommon Knowledge 2012,” May 7–9, 2012 at the Intercontinental Buckhead Atlanta in Georgia. Free conference attendance, U.S. air travel and lodging will be provided.
For more detail about submission rule, how to submit, etc., please visit the following pages:
http://www.mebanefaber.com/2011/09/09/investment-paper-competition-10000/
http://www.naaim.org/
http://www.naaim.org/files/2012_callforpapers_all.pdf
Paper Topics: The papers should cover an innovative topic in the area of active investing. This can be either a documented and justified investing approach or an exploration into the validity of active investing. Active investing topics can involve making investment decisions using technical analysis, quantitative analysis, etc. Papers can also address related topics such as position sizing techniques, money management approaches, scaling into and out of trades, exit strategies, etc.
Selection Criteria: Papers must be of practical significance to practitioners of active investing. The prize will be awarded to a paper resulting from research into active investment management, which NAAIM broadly defines as investment strategies and techniques that improve upon the risk-adjusted return obtainable from a passive, buy-and-hold, investment strategy. Many NAAIM members strive for consistent outperformance and focus on quantitatively or technically oriented investing. However papers that explore other types of active investment management or explore combining one or more types of active investment management will also be considered.
Prizes: Three prizes will be awarded. The best paper will receive the Wagner Award valued at $10,000; second place will receive $3,000 and third will receive $1,000. Honorable mentions or additional monetary prizes may be awarded at the judges’ discretion. In addition, the grand prizewinner will be invited to present his / her paper at the NAAIM annual conference: “NAAIM Uncommon Knowledge 2012,” May 7–9, 2012 at the Intercontinental Buckhead Atlanta in Georgia. Free conference attendance, U.S. air travel and lodging will be provided.
For more detail about submission rule, how to submit, etc., please visit the following pages:
http://www.mebanefaber.com/2011/09/09/investment-paper-competition-10000/
http://www.naaim.org/
http://www.naaim.org/files/2012_callforpapers_all.pdf
