Bridging the Orthodox/Behaviorist Divide
Capital markets are neither knowledge machines nor ships of fools. They are social learners, according to Kent Osband, continually correcting and refining their flawed predictions. Predictions are...
View ArticleThe Swiss Army Knife of Options Analytics
Finally, a solution to the most vexing problems of options pricing and fitting.
View ArticleConvexity Without Replication
We revise the standard analysis of constant maturity swaps, caps, and floors to account for dual forecast and discount curves. This reduces the pricing of these deals to evaluation of quadratic...
View ArticleElasticity of Variance of Variance
An empirical twoâhorse race between the Heston and SABR for the period around the 2008 financial crisis.
View ArticleThe Many�Worlds Interpretation of Risk Neutrality
There are many riskâneutral worlds, with different probabilities that support the same market prices. This matters in understanding how the originators of the BlackâScholes model each thought...
View ArticleEverything Is Rosy Now
âCapital markets are great shortâterm error correctors and poor longâterm predictors,â writes Kent. He calls the combination ârational myopia.â
View ArticleCars
Porsche arrives with its first allâelectric car for those who can't take Tesla seriously enough.
View ArticleThe skewed world of Jan Darasz
Wilmott, Volume 2020, Issue 105, Page 72-72, January 2020.
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Richard Feynman on the Distinction between Future and Past
“We have a different kind of awareness about what might happen than we have of what probably has happened”Continue reading on Cantorâs Paradise »
View ArticleCounterparty Credit Limits: An Effective Tool for Mitigating Counterparty...
A counterparty credit limit (CCL) is a limit imposed by a financial institution to cap its maximum possible exposure to a specified counterparty. Although CCLs are designed to help institutions...
View ArticleSharpe Ratio in High Dimensions: Cases of Maximum Out of Sample, Constrained...
In this paper, we analyze maximum Sharpe ratio when the number of assets in a portfolio is larger than its time span. One obstacle in this large dimensional setup is the singularity of the sample...
View ArticleRisk Loadings in Classification Ratemaking. (arXiv:2002.01798v1 [stat.AP])
The risk premium of a policy is the sum of the pure premium and the risk loading. In the classification ratemaking process, generalized linear models are usually used to calculate pure premiums, and...
View ArticleRental Housing Spot Markets: How Online Information Exchanges Can Supplement...
Traditional US rental housing data sources such as the American Community Survey and the American Housing Survey report on the transacted market - what existing renters pay each month. They do not...
View ArticleOn Shortfall Risk Minimization for Game Options. (arXiv:2002.01528v1 [q-fin.MF])
In this paper we study the existence of an optimal hedging strategy for the shortfall risk measure in the game options setup. We consider the continuous time Black--Scholes (BS) model. Our first result...
View ArticleDrilling and Debt
ABSTRACT This paper documents a previously unrecognized debtârelated investment distortion. Using detailed projectâlevel data for 69 firms in the oil and gas industry, we find that highly levered...
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Employees: the missing link between stakeholder capitalism’s pledges...
On the eve of the World Economic Forum’s 50th annual meeting in Davos, I wrote about the need for well-intentioned corporations seeking to lead a new era of stakeholder capitalism to convincingly...
View ArticleBeyond the Meat; Beyond the Traditional
By Aaron Filbeck, CFA, CAIA, CIPM, Associate Director, Content Development at CAIA Association Building the Burger I love when our industry uses analogies to describe investment concepts, so I must...
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