Tuesday, January 28, 2014

MoneyScience News

MoneyScience News

Published / Preprint: Option Pricing of Twin Assets. (arXiv:1401.6735v1 [q-fin.PR])

Posted: 27 Jan 2014 05:38 PM PST

How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index which is traded, for hedging purposes. Implicitly, traders assume here that the higher the correlation between the traded and nontraded assets, the better the...

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Published / Preprint: Modeling Credit Spreads Using Nonlinear Regression. (arXiv:1401.6955v1 [q-fin.ST])

Posted: 27 Jan 2014 05:38 PM PST

The term structure of credit spreads is studied with an aim to predict its future movements. A completely new approach to tackle this problem is presented, which utilizes nonlinear parametric models. The Brain-Cousens regression model with five parameters is chosen to describe the term structure of credit spreads. Further, we investigate the dependence of the parameter changes over time and the...

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Blog Post: TheFinancialServicesClub: A final note on KYC: it's getting serious

Posted: 27 Jan 2014 06:11 AM PST

OK, I’m going to cheat now and finish all the KYC chat by reproducing a couple of articles that spring boarded from the event.read more...

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Blog Post: TheAlephBlog: There are Limits to Valuations

Posted: 26 Jan 2014 06:01 PM PST

Every now and then, some will argue that there are no limits on valuations.  This tends to happen in bull markets.  We are getting that now.read more...

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Published / Preprint: Multidimensional Breeden-Litzenberger representation for state price densities and static hedging. (arXiv:1401.6383v1 [math.PR])

Posted: 26 Jan 2014 05:37 PM PST

In this article, we consider European options of type $h(X^1_T, X^2_T,\ldots, X^n_T)$ depending on several underlying assets. We study how such options can be valued in terms of simple vanilla options in non-specified market models. We consider different approaches related to static hedging and derive several pricing formulas for a wide class of payoff functions $h:\R_+^n\rightarrow...

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Published / Preprint: Interconnected risk contributions: an heavy-tail approach to analyse US financial sectors. (arXiv:1401.6408v1 [q-fin.RM])

Posted: 26 Jan 2014 05:37 PM PST

In this paper we consider a multivariate model-based approach to measure the dynamic evolution of tail risk interdependence among US banks, financial services and insurance sectors. To deeply investigate the risk contribution of insurers we consider separately life and non-life companies. To achieve this goal we apply the multivariate student-t Markov Switching model and the Multiple-CoVaR (CoES)...

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Blog Post: PatrickBurns: The portfolio optimization higher-moment credo

Posted: 26 Jan 2014 12:36 PM PST

The question of skewness and kurtosis in portfolio optimization.read more...

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Blog Post: ThePracticalQuant: What I use for data visualization

Posted: 26 Jan 2014 10:37 AM PST

[A version of this post appears on the O'Reilly Data blog.]Depending on the nature of the problem, data size, and deliverable, I still draw upon an array of tools for data visualization. As I survey the Design track at next month's Strata conference, I see creators and power users of visualizations tools that many data scientists have come to rely on. Several pioneers will lead sessions on (new)...

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