The 2016-17 Joint Risk and Stochastics and Financial Mathematics Seminar Series starts in October 2016. Unless otherwise stated, seminars take place in room CLM.7.02 in Clement House, Aldwych, starting at 12pm (one hour)
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All are welcome to attend these seminars. If you are attending from outside LSE please notify Penny Montague so that we can ensure you have access to the seminar room.
Thursday 13 October 2016: Room CLM.7.02, Clement House (Aldwych), 12pm to 1pm
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Frank Seifried
Professor for Probability Theory, University of Trier
Title: Epstein-Zin Stochastic Differential Utility: Foundations, Properties, and Portfolio Optimization
Abstract: This talk presents some recent contributions to the theory and applications of Epstein-Zin (EZ) stochastic differential utility.
First, we provide novel results on existence, uniqueness and concavity as well as a utility gradient inequality for EZ utility in a general semimartingale setting. In the second part, I would like to address consumption-portfolio choice with EZ utility. We develop a new approach to solve such problems in a large class of incomplete market models, based on fixed point arguments and the associated FBSDE system. Finally, using an asymptotic analysis we show how small proportional transaction costs influence optimal consumption and investment decisions of an agent with EZ utility.
Thursday 27 October 2016: Room CLM.7.02, Clement House (Aldwych), 12pm to 1pm
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Christoph Frei
Associate Professor of Mathematical Finance, University of Alberta
Title: Systemic Influences on Optimal Investment in Stocks and Credit Default Swaps
Abstract: Recent events have shown that the dependence structure of financial markets is more complex than what is captured by classical models. For example, during the 2008 financial crisis, the financial instability of some companies spread out to affect other companies. The goal of this talk is to analyze how such systemic influences are reflected in optimal investment decisions. To this end, we introduce a model with dependence structure between market risk and default risk of the companies. An investor can use stocks and credit default swaps (CDSs) to participate in the market. We derive an explicit expression for the optimal investment strategy in stocks and CDSs. This allows us to analyze the mechanisms driving the optimal investment decisions. We then develop a novel calibration procedure so that we can fit the model to historical time series of stock and CDS data. An empirical analysis reveals the critical role of systemic risk in portfolio monitoring.
This talk is based on joint work with Agostino Capponi (Columbia University).
Thursday 10 November 2016: Room CLM.7.02, Clement House (Aldwych), 12pm to 1pm
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Paolo Guasoni
Professor, School of Mathematical Sciences, Dublin City University
Title: Leveraged Funds: Robust Replication and Performance Evaluation
Abstract: Leveraged and inverse exchange-traded funds and certificates seek daily returns equal to a multiple of an index' return. The trading costs implied by the frequent portfolio adjustments required create a tension between tracking error, which reflects short-term correlation with the index, and excess return, the long-term deviation from the leveraged index' performance. With proportional trading costs, the optimal replication policy is robust to the index' dynamics. Overall fund performance depends on the implied spread, the product of tracking error and excess return, rescaled for leverage and volatility. The implied spread is insensitive to the risk premia and allows to compare funds tracking different factors of the same index.
Thursday 17 November 2016: Room NAB 1.15, New Academic Building, 12pm to 1pm
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Martin Larsson
Assistant Professor of Mathematical Finance, ETH Zurich
Title: Conditional infimum and recovery of monotone processes
Abstract: Monotone processes, just like martingales, can often be reconstructed from their final values. Examples include the running maximum of supermartingales, of fractional Brownian motion, and more generally, running maxima and local times of sticky processes. An interesting corollary is that any positive local martingale can be reconstructed from its final value and its global maximum. These results are derived from a simple no-arbitrage principle for monotone processes on certain complete lattices, analogous to the fundamental theorem of asset pricing in mathematical finance. The framework of complete lattices is sufficiently general to handle also more exotic examples, such as the process of convex hulls of multidimensional diffusions, and the process of sites visited by a random walk. The notion of conditional infimum is at the center of all of these results.
Thursday 24 November 2016: Room CLM.7.02, Clement House (Aldwych), 12pm to 1pm
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Aditi Dandapani
Postdoctoral Researcher, ETH Zurich
Title: Strict Local Martingales and Initial Expansions of Filtrations
Abstract: Beginning with a non negative model following a stochastic differential equation with stochastic volatility, we show how a strict local martingale might arise from a true martingale as a result of an enlargement of the underlying filtration. More precisely, we implement a particular type of enlargement, an "initial expansion" of the filtration, for various kinds of stochastic differential equation models, and we provide sufficient conditions such that this expansion can turn a martingale into a strict local martingale. Applications of our work include the modeling and detection of financial bubbles. For example, one might postulate that a bubble arises as a result of the arrival of new information, which we can model via an enlargement of the filtration.
Thursday 8 December 2016: Room CLM.7.02, Clement House (Aldwych), 12pm to 1pm
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To be confirmed
Friday 24 December 2017: Room CLM.2.05, Clement House (Aldwych), 12pm to 1pm
Agostino Capponi
Assistant Professor, Industrial Engineering & Operations Research, Columbia
Title and abstract TBC