Monthly Archives: November 2020

Seminar

Brooklyn Quant Experience Lecture Series: Ting-Kam Leonard Wong

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Brooklyn Quant Experience Lecture Series, NYU Tandon

The Department of Finance and Risk Engineering welcomes Ting-Kam Leonard Wong, Assistant Professor, Department of Statistical Sciences at the University of Toronto, to the BQE Lecture Series on Thursday, December 3, 2020, at 6 p.m. on Zoom.

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Meeting ID: 916 8329 0348
Password: BQETKLW

Title

Statistical Modeling of Capital Distribution and Portfolio Optimization

Abstract

Capitalization-weighted market indexes such as S&P500 summarize the performance of equity markets and serve as benchmarks of many individual and institutional investors. The ranked weights of a market index are called the capital distribution. In stochastic portfolio theory, it was shown that market diversity, a measure of the concentration of capital distribution, is significantly correlated with the relative performance of active portfolio managers. Statistical modeling of the capital distribution, however, is lacking in the literature. In this talk, we present an ongoing study on capital distribution from the viewpoint of high dimensional time series analysis. Using dynamic factor models, we show that the notion of market diversity can be justified statistically in terms of the most efficient dimension reduction of capital distribution. We also introduce a nonparametric portfolio optimization in the framework of stochastic portfolio theory to exploit the stability of the capital distribution.

Bio

Leonard Wong is an assistant professor in the Departments of Statistical Sciences at the University of Toronto and Computer and Mathematical Sciences at the University of Toronto Scarborough. He completed his Ph.D. in Mathematics at the University of Washington, after which he was a non-tenure track assistant professor at the University of Southern California. His current research interests include probability, mathematical finance, and optimal transport.

Seminar

Brooklyn Quant Experience Lecture Series: Oleg Bondarenko

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Brooklyn Quant Experience Lecture Series, NYU Tandon

The Department of Finance and Risk Engineering welcomes Oleg Bondarenko, Professor, the University of Illinois at Chicago, to the BQE Lecture Series on Thursday, November 19, 2020, at 6 p.m. on Zoom.

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Meeting ID: 991 8744 0867
Password: BQEOB

Title

Option-Implied Dependence and Correlation Risk Premium

Abstract

We propose a novel model-free approach to obtain the joint risk-neutral distribution among several assets that is consistent with all market prices of options on these assets and their weighted index. In an empirical application, we use options on the S&P 500 index and its nine industry sectors. The results of our analysis reveal that the option-implied dependence for the nine sectors is highly non-normal, asymmetric, and time-varying. The estimated joint distribution allows us to study two conditional correlations: when the market moves down or up. We find that the risk premium for the down correlation is strongly negative, while the opposite is true for the up correlation. These findings are consistent with the economic intuition that investors dislike the loss of diversification when markets fall, but they actually prefer high correlation when markets rally.

Bio

Oleg Bondarenko is a Professor of Finance at the University of Illinois at Chicago. He received an MS degree from the Moscow Institute of Physics and Technology and a Ph.D. from the California Institute of Technology. His primary research interests include option pricing, financial econometrics, and market microstructure. His research has appeared in top Finance and Economics journals and has been featured in Morningstar, Economist, and other media outlets.

Professor Bondarenko has consulted with several investment firms and currently serves on the Product Development Committee of Chicago Board Options Exchange (Cboe). His research has been supported by the Chicago Mercantile Exchange, Cboe, Institute of Structured Finance, and Derivatives, among others. He has written two research studies commissioned by Cboe. Professor Bondarenko held visiting faculty positions at the Olin School of Business, Washington University in St. Louis, and Kellogg School of Management, Northwestern University.

Seminar
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Brooklyn Quant Experience Lecture Series, NYU Tandon

The Department of Finance and Risk Engineering welcomes Oleg Bondarenko, Professor, the University of Illinois at Chicago, to the BQE Lecture Series on Thursday, November 19, 2020, at 6 p.m. on Zoom.

Attend Virtually >>

Meeting ID: 991 8744 0867
Password: BQEOB

Title

Option-Implied Dependence and Correlation Risk Premium

Abstract

We propose a novel model-free approach to obtain the joint risk-neutral distribution among several assets that is consistent with all market prices of options on these assets and their weighted index. In an empirical application, we use options on the S&P 500 index and its nine industry sectors. The results of our analysis reveal that the option-implied dependence for the nine sectors is highly non-normal, asymmetric, and time-varying. The estimated joint distribution allows us to study two conditional correlations: when the market moves down or up. We find that the risk premium for the down correlation is strongly negative, while the opposite is true for the up correlation. These findings are consistent with the economic intuition that investors dislike the loss of diversification when markets fall, but they actually prefer high correlation when markets rally.

Bio

Oleg Bondarenko is a Professor of Finance at the University of Illinois at Chicago. He received an MS degree from the Moscow Institute of Physics and Technology and a Ph.D. from the California Institute of Technology. His primary research interests include option pricing, financial econometrics, and market microstructure. His research has appeared in top Finance and Economics journals and has been featured in Morningstar, Economist, and other media outlets.

Professor Bondarenko has consulted with several investment firms and currently serves on the Product Development Committee of Chicago Board Options Exchange (Cboe). His research has been supported by the Chicago Mercantile Exchange, Cboe, Institute of Structured Finance, and Derivatives, among others. He has written two research studies commissioned by Cboe. Professor Bondarenko held visiting faculty positions at the Olin School of Business, Washington University in St. Louis, and Kellogg School of Management, Northwestern University.

Seminar

Brooklyn Quant Experience Lecture Series: David Shimko

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Brooklyn Quant Experience Lecture Series, NYU Tandon

The Department of Finance and Risk Engineering welcomes David Shimko, NYU Tandon, Industry Full Professor, to the BQE Lecture Series on Thursday, November 12, 2020, at 6 p.m. on Zoom.

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Meeting ID: 993 5500 0941
Password: BQEDS

Title

A Theory of Equivalent Expectations Measures for Expected Prices of Contingent Claims

Abstract

Reframing modern portfolio theory with Gaussian cash flows rather than percentage returns, the CFPM (cash flow portfolio model) sets a structural foundation for valuing both traditional capital assets and derivatives. Asset prices are shown to be decreasing functions of both cash flow covariances and variances. The usual single-period CAPM formulas follow, but the expected returns are determined endogenously. All risk is implicitly priced in expected returns, leading to reinterpreted rules for portfolio selection and capital budgeting. Derivatives obey the same total covariance-based pricing relationships as cash flows, except that they exist in zero net supply. After applying a regularity condition, the Bachelier option pricing model obtains in a discrete-time setting without continuous trading. The closed-form CFPM extends to multiple periods. The multiperiod CFPM generalizes risk-neutral pricing to discrete multi-period contingent claim models, such as valuing the capital structure of a firm and CDOs.

Bio

Professor Shimko joined FRE in 2017 following a 30+ year career in investment banking and consulting. After beginning his career as an Assistant Professor at USC, he left to become a Vice President at JPMorgan, and a Principal at Bankers Trust. He co-founded Risk Capital, a successful independent risk management consulting firm, which was sold in 2006. Since that time, he has combined private consulting with entrepreneurial ventures in asset management and credit. His current research focuses on advanced valuation techniques, such as the application of derivative pricing technology to corporate assets, liabilities, and decisions.

Seminar

IAQF: How I Became a Quant

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IAQF: How I Became a Quant

Financial Engineers Give a Personal View
of Their Careers in Quantitative Finance

A Series of Panel Discussions for Students
Interested in a Career in Quantitative Finance

How I Became a Quant: Washington, DC

Wednesday, November 18th
7:30 pm
Virtual Event

In Partnership with

The George Washington University
School of Business

Panelists

Ali Arar, Fimineco

Lipika Hayet, Capital One

Gregg Berman, Citadel

Moderator

Stephen Young, Wells Fargo

Registration is Free!

REGISTER >>

Sponsored by:
The George Washington University
School of Business

The George Washington University, Washington D.C.

Seminar

Cornell – Citi Financial Data Science Webinars

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Cornell Engineering. Operations Research and Information Engineering. Financial Engineering Manhattan

You and your colleagues are invited to attend the Cornell – Citi Financial Data Science Webinars. Through the online talks this semester, we are excited to collaborate with Citi in highlighting machine learning applications in finance.

All webinars are from 5:00 pm to 6:00 pm EST.

This webinar is free and open to all guests. Registration is required (RSVP). You will receive the webinar link and dial-in info upon registration (the confirmation email will come from
no-reply@zoom.us)

Date: Tuesday, Nov. 17th, 2020
Time: 5:00 pm – 6:00 pm EST
Speaker: Paul Besson | Euronext
Title: “European Liquidity and Trading Flows During the COVID-19 Crisis: Insights from Euronext Data”

Abstract
Part 1: Liquidity Overview

Part 2: How Orderbooks Reacted to COVID-19

Part 3: How Brokers, Liquidity Providers, and Retail Reacted to COVID-19

Speaker Bio
Paul heads Euronext’s Quantitative Research department. His main area of research is Market Microstructure and Behavioural Finance on Flows Analysis. Prior to this, he held the same position for seven years at Kepler Cheuvreux, the largest independent European broker. Paul has twelve years’ previous experience as a fund manager in quantitative arbitrage, both for hedge funds and long-only funds. Paul regularly presents papers at academic conferences and has authored various publications on Market Microstructure in applied journals.

He has been a lecturer for a number of institutions, and still gives lectures for Paris Dauphine University. Paul graduated from ENSAE Paris.

We hope to see you online!

The Cornell-Citi Team

**Please excuse any duplication of this announcement

Previous CFEM Events

Sep. 1st, 2020
Speaker: Michael Rabadi (Balyasny Asset Management)

Oct. 6th, 2020
Speaker: Rama Cont (Oxford University) and Francesco Capponi (BlackRock)

Seminar

Brooklyn Quant Experience Lecture Series: Sanjay Nawalkha

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Brooklyn Quant Experience Lecture Series, NYU Tandon

The Department of Finance and Risk Engineering at NYU Tandon School of Engineering, welcomes Sanjay K. Nawalkha, Professor of Finance, University of Massachusetts, to the BQE Lecture Series on Thursday, November 5, 2020, at 6 p.m. on Zoom.

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Meeting ID: 945 2031 9822
Password: BQESN

Title

A Theory of Equivalent Expectations Measures for Expected Prices of Contingent Claims

Abstract

This paper introduces a theory of equivalent expectation measures, such as the R measure and the R1T measure, generalizing the martingale pricing theory of Harrison and Kreps (1979) for deriving analytical solutions of expected prices (both the expected current price and the expected future price) of contingent claims. We also present new R-transforms which extend the Q-transforms of Bakshi and Madan (2000) and Duffie et al. (2000), for computing the expected prices of a variety of standard and exotic claims under a broad range of stochastic processes. Finally, as a generalization of Breeden and Litzenberger (1978), we propose a new concept of the expected future state price density which allows the estimation of the expected future prices of complex European contingent claims as well as the physical density of the underlying asset’s future price, using the current prices and only the first return moment of standard European OTM call and put options.

Bio

Sanjay Nawalkha is a Professor of Finance at the Isenberg School of Management. His areas of research are fixed income valuation, derivative pricing, and asset pricing. Professor Nawalkha chaired the Finance Department at the Isenberg School of Management from Sept. 2011 until August 2018. He has co-authored four books, Dynamic Term Structure Modeling: The Fixed Income Valuation Course (Wiley & Sons, 2007), Interest Rate Risk Modeling: The Fixed Income Valuation Course (Wiley & Sons, 2005), Interest Rate Risk Measurement and Management (Institutional Investors, 1999) and Closed-Form Duration Measures and Strategy Applications (The Research Foundation of the Institute of Chartered Financial Analysts, 1990). He has published over 35 scholarly articles in the areas of term structure modeling, risk management, and arbitrage pricing theory.