43 research outputs found
Risk Sensitive Investment Management with Affine Processes: a Viscosity Approach
No full textIn this paper, we extend the jump-diffusion model proposed by Davis and Lleo to include jumps in asset prices as well as valuation factors. The criterion, following earlier work by Bielecki, Pliska, Nagai and others, is risk-sensitive optimization (equivalent to maximizing the expected growth rate subject to a constraint on variance.) In this setting, the Hamilton- Jacobi-Bellman equation is a partial integro-differential PDE. The main result of the paper is to show that the value function of the control problem is the unique viscosity solution of the Hamilton-Jacobi-Bellman equation.
Contributions to risk-sensitive asset management
No full textEThOS - Electronic Theses Online ServiceGBUnited Kingdo
lleo meconial
No full textThe term Meconium Ileus refers to three different conditions of similar pathologic anatomy and clinicalfeatures. but very different prognosis and ·treatment. The author describes: 1) Classic Meconium Ileus and its complications being an affection of high inmediate, mediate and latemortality. 2) The Meconium Plug Síndrome of easy resolution and good prognosis when ever correct diagnosis is established. 3) Meconium obstruction in the absence of mucoviscidosisa rare afection associa ted with intestinal absortive anomalies and whose prognosis is better than of Classic Meconium Ileus.El término ileo meconial comprende tres entidades nosológicas con similitud anatomoclínica pero que difieren en su pronóstico y tratamiento.Se describen: el I. M. Clásico y sus complicaciones con su elevado porcentaje de mortalidad inmediata, mediata y tardía. El síndrome del tapón meconial defácil resolución y buen pronóstico una vez diagnosticado. Por último, el I. M. no asociado a mucoviscidosis, afección rara relacionada con trastornos disabsortivosy cuyo pronóstico es más favorable que el I M. Clásico
Some historical perspectives on the Bond-Stock Earnings Yield Model for crash prediction around the world
No full textWe provide a historical perspective focusing on Ziemba's experiences and research on the bond-stock earnings yield differential model (BSEYD) starting from when he first used it in Japan in 1988 through to the present in 2014. The model has called many but not all crashes. Those called have high interest rates in long term bonds relative to the trailing earnings to price ratio. In general, when the model is in the danger zone, almost always there will be a crash. The model predicted the crashes in China, Iceland and the US in the 2006-9 period. Iceland had a drop of fully 95%. For the US the call was on June 14, 2007 and the stock market fell 56.8%. A longer term study for the US, Canada, Japan, Germany, and UK shows that over long periods being in the stock market when the bond-stock signal is not in the danger zone and in cash when it is in the danger zone provides a final wealth about double buy and hold for each of these five countries. The best use of the model is for predicting crashes. Finally we compare Shiller's high PE ratio crash model to the BSEYD model for the US market from 1962-2012. While both models add value, the BSEYD model predicts crashes better
A tale of two indexes: predicting equity market downturns in China
No full textPredicting stock market crashes is a focus of interest for both researchers and practitioners. Several prediction models have been developed, mostly for use on mature financial markets. In this paper, we investigate whether traditional crash predictors, the price-to-earnings ratio, the Cyclically Adjusted Price-to-Earnings ratio and the Bond-Stock Earnings Yield Differential model, predicts crashes for the Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange Composite Index
A tale of two indexes: predicting equity market downturns in China
No full textPredicting stock market crashes is a focus of interest for both researchers and practitioners. Several prediction models have been developed, mostly for use on mature financial markets. In this paper, we investigate whether traditional crash predictors, the price-to earnings ratio, the Cyclically Adjusted Price-to-Earnings ratio and the Bond-Stock Earnings Yield Differential model, predict crashes for the Shanghai Stock Exchange Composite Index and the Shenzhen Stock Exchange Composite Index. We also constructed active investment strategies based on these predictors. We found that these crash predictors have predictive power and the active strategies delivered lower risk and higher risk-adjusted return than a simple buy and hold investment
Jump-Diffusion Risk-Sensitive Asset Management II: Jump-Diffusion Factor Model
No full textIn this article we extend earlier work on the jump-diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the factor process and the asset prices, as well as stochastic volatility and investment constraints. In this case, the HJB equation is a partial integro-differential equation (PIDE). By combining viscosity solutions with a change of notation, a policy improvement argument and classical results on parabolic PDEs we prove that the HJB PIDE admits a unique smooth solution. A verification theorem concludes the resolution of this problem.
How to lose money in derivatives: examples from hedge funds and bank trading departments
No full textWhat makes futures hedge funds fail? The common ingredient is over betting and not being diversified in some bad scenarios that can lead to disaster. Once troubles arise, it is difficult to take the necessary actions that eliminate the problem. Moreover, many hedge fund operators tend not to make decisions to minimize losses but rather tend to bet more doubling up hoping to exit the problem with a profit. Incentives, including large fees on gains and minimal penalties for losses, push managers into such risky and reckless behavior. We discuss some specific ways losses occur. To illustrate, we discuss the specific cases of Long Term Capital Management, Niederhoffer’s hedge fund, Amaranth and Société Genéralé. In some cases, the failures lead to contagion in other hedge funds and financial institutions. We also list other hedge fund and bank trading failures with brief comments on them
