Transcript Handbook of Quantitative Finance and Risk Management

Development of
Quantitative Finance and Risk
Management:
Past, Present, and Future
李正福
教授
羅格斯大學財務金融講座教授
交通大學財務金融兼任講座教授
數量財務及會計評論主編
亞太金融市場及政策評論主編
2008/01/11 Conference on Quantitative Finance and Risk Management
Outline
Part I – Introduction
Part II – Essays
Chapter 1 Theoretical Framework of Finance
1) Classical Theory
2) New classical theory
3) CAPM and APT
4) Options and Futures Theory
Chapter 2 Policy Framework of Finance
1) Investment Policy
2) Financial Policy
3) Dividend Policy
4) Production Policy
Chapter 3 Research Methods of Quantitative Finance and Risk Management
1) Statistics
2) Econometrics
3) Mathematics
4) Operation research
5) Stochastic process
6) Computer science and technology
7) Entropy
8) Fuzzy set Theory
9) Other Methods
Chapter 4 Overview of Quantitative Finance and Risk Management Research
Outline
Part III –Portfolio Analysis
Chapter 1 Basic Concepts of Portfolio Analysis
Chapter 2 Markowitz Portfolio-Selection Model
Chapter 3 Capital Asset Pricing Model and Beta Forecasting
Chapter 4 Index Model for Portfolio Selection
Chapter 5 Performance-Measure Approaches for Selecting Optimum
Portfolios
Part IV – Options and Futures
A. Basic Concepts and Strategies
Chapter 1 Introduction
Chapter 2 Options and Option Strategy
B. Statistical Analysis Approaches
Chapter 3 Binomial Option Pricing Models
Chapter 4 Multinomial Option Pricing Model
Chapter 5 The Lognormal Option Pricing Model
Chapter 6 Bivariate Normal Option Pricing Models
Outline
Part IV – Options and Futures
C. Stochastic Calculus Approaches
Chapter 7 Ito Calculus and The Black and Scholes Option Pricing Model
Chapter 8 Constant Elasticity of Variance (CEV) Option Pricing Model
Chapter 9 Stochastic Volatility Option Pricing Model
Chapter 10 A General Option Pricing Model
D. Applications
Chapter 11 Option Valuation and Hedging
Chapter 12 Foreign Exchange Option Pricing Models
Chapter 13 Index Option Pricing Models
Chapter 14 Real Options
Chapter 15 Option Pricing Model and Risk Management
Chapter 16 Summary and Concluding Remarks
Part V – Contributed Papers (See Appendix A)
Part VI – Summary and Concluding Remarks
1. Theory
2. Methods
3. Application
a. New Products
b. Trading Strategy
c. Hedging Strategy
d. Wealth Management
e. Risk Management
f. CDO and Subprime Markets
g. Others
Part I –
Introduction
Part II –
Essays
Part II – Essays
Chapter 1 Theoretical Framework of Finance
1) Classical Theory
2) New classical theory
3) CAPM and APT
4) Options and Futures Theory
Chapter 2 Policy Framework of Finance
1) Investment Policy
2) Financial Policy
3) Dividend Policy
4) Production Policy
Chapter 3 Research Methods of Quantitative Finance and Risk Management
1) Statistics
2) Econometrics
3) Mathematics
4) Operation research
5) Stochastic process
6) Computer science and technology
7) Entropy
8) Fuzzy set Theory
9) Other Methods
Chapter 4 Overview of Quantitative Finance and Risk Management Research
Part III –
Portfolio Analysis
Part III – Portfolio Analysis
Chapter 1 Basic Concepts of Portfolio Analysis
Chapter 2 Markowitz Portfolio-Selection Model
Chapter 3 Capital Asset Pricing Model and Beta
Forecasting
Chapter 4 Index Model for Portfolio Selection
Chapter 5 Performance-Measure Approaches for Selecting
Optimum Portfolios
Part IV –
Options and Futures
Part IV – Options and Futures
A. Basic Concepts and Strategies
Chapter 1 Introduction
Chapter 2 Options and Option Strategy
B. Statistical Analysis Approaches
Chapter 3 Binomial Option Pricing Models
Chapter 4 Multinomial Option Pricing Model
Chapter 5 The Lognormal Option Pricing Model
Chapter 6 Bivariate Normal Option Pricing Models
Part IV – Options and Futures
C. Stochastic Calculus Approaches
Chapter 7 Ito Calculus and The Black and Scholes Option Pricing Model
Chapter 8 Constant Elasticity of Variance (CEV) Option Pricing Model
Chapter 9 Stochastic Volatility Option Pricing Model
Chapter 10 A General Option Pricing Model
D. Applications
Chapter 11 Option Valuation and Hedging
Chapter 12 Foreign Exchange Option Pricing Models
Chapter 13 Index Option Pricing Models
Chapter 14 Real Options
Chapter 15 Option Pricing Model and Risk Management
Chapter 16 Summary and Concluding Remarks
Part V –
Contributed Papers
(See Appendix A)
Part VI –
Summary and
Concluding Remarks
Part VI – Summary and
Concluding Remarks
1. Theory
2. Methods
3. Application
a. New Products
b. Trading Strategy
c. Hedging Strategy
d. Wealth Management
e. Risk Management
f. CDO and Subprime Markets
g. Others
Appendix A
Chapter 1: The Creation and Control of Speculative Bubbles in a Laboratory Setting
James S. Ang, Florida State University, USA
Dean Diavatopoulous, Florida State University, USA
Thomas V. Schwarz, Grand Valley State University, USA
Chapter 2: Business Models: Applications to Capital Budgeting, Equity Value and Return Attribution
Thomas S. Y. Ho
Sang Bin Lee, Hanyang University, Korea
Chapter 3: Risk and Valuation Under an Intertemporal Capital Asset Pricing Models
Michael J. Brennan, Anderson School, USA
Yihong Xia, Pennsylvania University, USA
Chapter 4: Portfolio Optimization Models and Mean-Variance Spanning Tests
Wei-Peng Chen, Shih Hsin University, Taiwan
Huimin Chung, National Chiao Tung University, Taiwan
Keng-Yu Ho, National Central University, Taiwan
Tsui-Ling Hseu, National Chiao Tung University, Taiwan
Chapter 5: A Further Analysis of Convergence Rate and Pattern of the Binomial Models
San-Lin Chung, National Taiwan University, Taiwan
Pai-Ta Shih, National Dong Hwa University, Taiwan
Appendix A
Chapter 6: Combining Fundamental Measures for Stock Selection: Some Thoughts
Kenton K. Yee, Columbia Business School, USA
Chapter 7: Dividends vs. Reinvestments in Continuous Time: A More General Model
Ren-Raw Chen, Rutgers University, USA
Ben Logan
Oded Palmon, Rutgers University, USA
Larry Shepp, Rutgers University, USA
Chapter 8: Time Series Modeling of Asset Returns Volatilities
Tze Leung Lai, Stanford University, USA
Haipeng Xing, Columbia University, USA
Chapter 9: On Estimation Risk and Power Utility Portfolio Selection
Robert R. Grauer, Simon Fraser University, USA
Frederick C. Shen
Chapter 10: Segmenting financial services market: An Empirical Study of Statistical and Non-parametric
Methods
Kenneth Lawrence, New Jersey Institute of Technology, USA
Dinesh Pai, Rutgers University, USA
Ronald Klimberg, St. Joseph’s University, USA
Stephen Kudbya, New Jersey Institute of Technology, USA
Sheila Lawrence, Rutgers University, USA
Appendix A
Chapter 11: Recovering Probabilistic Information From Options Prices and the Underlying
Bruce Mizrach, Rutgers University, USA
Chapter 12: Combinatorial Methods for Reverse-Engineering and Construction of Credit Risk
Ratings
Alexander Kogan, Rutgers University, USA
Miguel A. Lejeune, Carnegie Mellon University, USA
Chapter 13: Displaced Log Normal and Lognormal American Option Pricing: A Comparison
Ren-Raw Chen, Rutgers University, USA
Cheng-Few Lee, Rutgers University, USA
Chapter 14: Are Tails Fast Enough to Explain Smile
Ren-Raw Chen, Rutgers University, USA
Oded Palmon, Rutgers University, USA
John Wald, Pennsylvania State University, USA
Chapter 15: Two Alternative Approaches to Derive Black-Schools Option Pricing Model:
Comparison and Analysis
Cheng-Few Lee, Rutgers University, USA
Carle Shu Ming Lin, Rutgers University, USA
Appendix A
Chapter 16: Spurious Regression and Data Mining in Conditional Asset Pricing Models
Wayne Ferson, University of Southern California, USA
Sergei Sarkissian, McGill University, USA
Timothy Simin, Pennsylvania State University, USA
Chapter 17: Structural Approach for Credit Risk Modeling
Jingzhi Huang, Pennsylvania State University, USA
Chapter 18: An Empirical Investigation of the Rationales for Integrated Risk-Management
Behavior
Michael S. Pagano, Villanova University, USA
Chapter 19: Implementing Risk Management Systems with a Benchmark: a Web-Based DSS
Approach
Larry Eisenberg, University of Southern Mississippi, USA
Chang-tseh Hsieh, University of Southern Mississippi, USA
Chapter 20: The Le Chatelier Principle in the Markowitz Quadratic Programming Investment
Model: A Case of World Equity Fund Market
Chin W. Yang, Clarion University of Pennsylvania, USA
Ken Hung, National Dong Hwa University, Taiwan
Jing Chui, Clarion University of Pennsylvania, USA
Appendix A
Chapter 21: Copula, Correlated Defaults and Credit VaR
Jow-Ran Chang, National Tsing Hua University, Taiwan
An-Chi Chen, KGI Securities Co. Ltd., Taiwan
Chapter 22: An Errors-in-variables Problem in Asset Pricing Tests
Dongcheol Kim, Rutgers University, USA
Chapter 23: Pricing and Hedging Interest Rate Derivatives In the Presence of
Unspanned Stochastic Volatilities
Feng Zhao, Rutgers University, USA
Chapter 24: Liquidity Risk and Arbitrage Pricing Theory
Umut Cetin, Technische University Wein, USA
Robert A. Jarrow, Cornell University, USA
Philip Protter, Cornell University, USA
Chapter 25: Stock Returns, Extreme Values, and Conditional Skewed Distribution
Thomas C. Chiang, Drexel University, USA
Jiandong Li, Drexel University, USA
Appendix A
Chapter 26: MCMC Estimation of Multiscale Stochastic Volatility Models
German Molina, Vega Capital Services Ltd., UK
Chuan-Hsiang Han, National Tsing Hua University, Taiwan
Jean-Pierre Fouque, University of California, USA
Chapter 27: Security Market Microstructure: The Analysis of a Non-Frictionless Market
Robert Schwartz, Zicklin School of Business, USA
Reto Francioni,
Martin Reck
Chapter 28: Robust prediction of default risk?
Chung-Hua Shen, National Taiwan University, Taiwan
Yi-Kai Chen, National University of Kaohsiung, Taiwan
Bor-Yi Huang, Shih Chien University, Taiwan
Chapter 29: Risk Management for Catastrophe Loss
Jin-Ping Lee, Feng Chia University, Taiwan
Min-Teh Yu, Providence University, Taiwan
Chapter 30: Regime Shifts and the Term Structure of Interest Rates
Chien-Chung Nieh, Tamkang University, Taiwan
Shu Wu, The University of Kansas, USA
Yong Zeng, The University of Missouri at Kansas City, USA
Appendix A
Chapter 31: ARM Processes and Their Modeling and Forecasting Methodology
Benjamin Melamed, Rutgers Business School, USA
Chapter 32: Alternative Econometric Methods for Information-based Equity-selling
Mechanisms
Cheng Few Lee, Rutgers University, USA
Yi Lin Wu, National Tsing Hua University, Taiwan
Chapter 33: Implementation Problems and Solutions in Stochastic Volatility Models of the
Heston Type
Jia-Hau Guo, Soochow University, Taiwan
Mao-Wei Hung, National Taiwan University, Taiwan
Chapter 34: Univariate and Bivariate GARCH Analyses for the Volume versus GARCH effects
Zhuo Qiao, National University of Singapore, Singapore
Wing-Keung Wong, National University of Singapore, Singapore
Chapter 35: Application of Fuzzy Set Theory to Finance Research: Method and Application
Shin-Yun Wang, National Dong Hwa University, Taiwan
Cheng-Few Lee, Rutgers University, USA
Appendix A
Chapter 36: Hedonic Regression Analysis: A Primer
Ben J. Sopranzetti, Rutgers University, USA
Chapter 37: Risk-Adverse Portfolio Optimization via Stochastic Dominance Contraints
Darinka Dentcheva, Stevens Institute of Technology, USA
Andrzej Ruszczynski, Rutgers University, USA
Chapter 38: A Real Option Approach to the Comprehensive Analysis of Bank Consolidation
Values
Chuang-Chang Chang, National Central University, Taiwan
Pei-Fang Hsieh, National Central University, Taiwan
Hung-Neng Lai, National Central University, Taiwan
Chapter 39: Numerical Methods of PDE in Computational Finance
Gang Nathan Dong, Rutgers University, USA
Chapter 40: Capital Structure in Asia and CEO Entrenchment
Kin Wai Lee, Nanyang Technological University, Singapore
Gillian Hian Heng Yeo, Nanyang Technological University, Singapore
Appendix A
Chapter 41: Estimating Future Hedge Ratio: A General Hyperbolic Distribution Approach
Cheng-Few Lee, National Chiao Tung University, Taiwan
Jang-Yi Lee, Tunghai University, Taiwan
Kehluh Wang, National Chiao Tung University, Taiwan
Yuan-Chung Sheu, National Chiao Tung University, Taiwan
Chapter 42: The Sensitivity of Corporate Bond Volatility to Macroeconomic Announcements
Nikolay Kosturov, University of Oklahoma, USA
Duane Stock, University of Oklahoma, USA
Chapter 43: Option Pricing and Hedging Performance under Stochastic Volatility and Stochastic Interest
Rates
Gurdip Bakshi, University of Maryland, USA
Charles Cao, Penn State University, USA
Zhiwu Chen, Yale University, USA
Chapter 44: Itô’s Calculus and the Derivation of the Black-Scholes Option-Pricing Model
George Chalamandaris, Athens University of Economics and Business, Greece
A.G. Malliaris, Loyola University Chicago, USA
Chapter 45: Portfolio Analysis
Jack Clark Francis, Baruch College, USA
Appendix A
Chapter 46: Equity Market Microstructure: The Analysis of a Non-Frictionless Market
Reto Francioni, Deutsche Bank, USA
Sonali Hazarika, Baruch College, USA
Martin Reck, Deutsche Bank, USA
Robert A. Schwartz, Baruch College, USA
Chapter 47: Raw Material Convenience Yields and Business Cycle
Chang-Wen Duan, Tamkang University, Taiwan
William T. Lin, Tamkang University, Taiwan
Chapter 48: Default and Prepayment Study in US Subprime Markets
C.H. Ted Hong, Beyondbond, USA
Chapter 49: The Valuation of Uncertain Income Streams and the Pricing of Options
Mark Rubinstein, University of California Berkley, USA
Chapter 50: A Primer on the Implicit Financing Assumptions of Traditional Capital Budgeting
Approaches
Ivan Brick, Rutgers University, USA
Daniel Weaver, Rutgers University, USA
Appendix A
Chapter 51: Portfolio Theory, CAPM, and Performance Measures
Luis Ferruz, University of Zaragoza, Spain
Chapter 52: The Effect of Default Risk on Equity Liquidity: Evidence Based on the Panel Threshold Model
Huimin Chung, National Chiao Tung University , Taiwan
Wei-Peng Chen, Shih-Hsin University , Taiwan
Yu-Dan Chen, National Chiao Tung University , Taiwan
Chapter 53: Derivation and application of Greek letters
Cheng-Few Lee, Rutgers University, USA
David Chen, Rutgers University, USA
Weikang Shih, Rutgers University, USA
Chapter 54: Put option approach to determine bank risk premium
Dar-Yeh Huang, National Taiwan University, Taiwan
Fu-Shuen Shie, National Taiwan University, Taiwan
Wei-Hsiung Wu, National Taiwan University, Taiwan
Chapter 55: Alternative Methods to Determine Optimal Capital Structure: Theory and Application
Sheng-Syan Chen, National Taiwan University, Taiwan
Cheng-Few Lee, National Chiao Tung University, Taiwan
Han-Hsing Lee, National Chiao Tung University, Taiwan
Appendix A
Chapter 56: Characteristic function and Finance Research
Ying-Lin Hsu, National Chung Hsing University, Taiwan
Cheng-Few Lee, Rutgers University, USA
Chapter 57: Entropy and Its Application in Finance Research
Hyley Huang, National Chiao Tung University and Wintek Corporation, Taiwan
Cheng-Few Lee, Rutgers University, USA
Chapter 58: Structure Equation Model in Finance and Accounting Research
Chingfu Chang, National Chengchi University, Taiwan
Cheng-Few Lee, Rutgers University, USA
Chapter 59: Genetic Programming for Options Pricing
Nemmara Chidambaran, Rutgers University, USA
Chapter 60: Predicting Prices with Defense Forecasting
Glenn Schafer, Rutgers University, USA
Sam Ring, Rutgers University, USA
Appendix A
Chapter 61: Hedging Theories and Applications
Keshab Shrestha, Nanyang Technological University, Singapore
Chapter 62: Intertemporal Equilibrium Models, Portfolio Theory and the Capital
Asset Pricing Model
Stephen J. Brown, New York University, USA
Chapter 63: Issue of Corporate Finance Research
Kose John, New York University, USA
Chapter 64: Asian Options
Itzhak Venezia, Hebrew University, USA
Chapter 65: Keiretsu Style Main Bank Relationships, R&D Investment, Leverage,
and Firm Value: Evidence from Japanese Listed Companies
Hai-Chin Yu, Chung Yuan University, Taiwan
Chih-Sean Chen, Chung Yuan University, Taiwan
Der-Tzon Hsieh, National Taiwan University, Taiwan
Appendix A
Chapter 66: Alternative Models for Estimating the Cost of Equity Capital for Property/Casualty Insurers
Alice Lee, San Francisco State University, USA
J.D. Cumming, Temple University, USA
Chapter 67: An ODE Approach for the Expected Discounted Penalty at Ruin
Cheng Few Lee, Rutgers University, USA
Yu-Ting Chen, National Chao Tung University, Taiwan
Yuan-Chung Sheu, National Chao Tung University, Taiwan
Chapter 68: Functional Forms, Market Segmentation and Pricing of Closed-end Country Funds
Cheng-Few Lee, Rutgers University, USA
Dilip K. Patro, Federal Deposit Insurance Company, USA
Bo Liu, Rutgers University, USA
Alice C. Lee, San Francisco State University, USA
Chapter 69: Actuarial mathematics and its applications in quantitative finance
Cho-Jieh Chen, University of Alberta, Canada
Chapter 70: Examining the Impact of US IT Stock Market on Other IT Stock Markets
Zhuo Qiao, National University of Singapore, Singapore
Venus Khim-Sen Liew, Universiti Malaysia Sabah, Malaysia
Wing-Keung Wong, Hong Kong Baptist University, Hong Kong
Appendix A
Chapter 71: Time-Series Econometrics and Dynamic Financial Models
Robert H. Patrick, Rutgers University, USA
Chaptere72 Framework of Structure Finance
Francis Eng, Rutgers University, USA
Chapter73 Persistence, Predictability and Portfolio Planning
Michael J. Brennan, University of California at Los Angeles, USA
Yihong Xia Wharton School, USA
Chapter 74 Application of Alternative ODE in Finance and Economics Research
Cheng Few Lee, Rutgers University, USA
Junmin Shi, Rutgers University, USA
Chapter 75 Term Structure and Risk Management
ChunChi Wu, University of Missouri, USA
Chapter 76 Issues in Operational Risk Modeling
Mo Chaudhury, State Street Corporation, USA
Satya Mohit, State Street Corporation, USA
Chapter 77 Application of Simultaneous Equation in Finance Research
Carl R. Chen, University of Dayton, USA
Cheng Few Lee, Rutgers University, USA
Appendix A
Chapter 78: Alternative Method for Credit Risk Management: Theory and Method
Cheng Few Lee, Rutgers University, USA
Bi-Huei Tsai, National Chiao Tung University, Taiwan
Kehluh Wang, National Chiao Tung University, Taiwan
Jessica Shin-Ying Mai, Rutgers University, USA
Chapter 79 : Future Hedge Ratios: A Review
Sheng-Syan Cheng, National Taiwan University, Taiwan
Keshab Shrestha, Nanyang Technological University, Singapore
Cheng Few Lee, Rutgers University, USA
Chapter 80 : International Portfolio Management: Theory and Method
Wan-Jiun Paul Chiou, Shippensburg University, USA
Cheng Few Lee, Rutgers University, USA