Review of the literature on credit risk modeling : development of the past 10 years

This paper traces the developments of credit risk modeling in the past 10 years. Our work can be divided into two parts: selecting articles and summarizing results. On the one hand, by constructing an ordered logit model on historical Journal of Economic Literature (JEL) codes of articles about credit risk modeling, we sort out articles which are the most related to our topic. The result indicates that the JEL codes have become the standard to classify researches in credit risk modeling. On the other hand, comparing with the classical review Altman and Saunders(1998), we observe some important changes of research methods of credit risk. The main finding is that current focuses on credit risk modeling have moved from static individual-level models to dynamic portfolio models.

Ensaios em Finanças

Esta tese é composta de três artigos sobre finanças. O primeiro tem o título "Nonparametric Option Pricing with Generalized Entropic Estimators " e estuda um método de apreçamento de derivativos em mercados incompletos. Este método está relacionado com membros da família de funções de Cressie-Read em que cada membro fornece uma medida neutra ao risco. Vários testes são feitos. Os resultados destes testes sugerem um modo de definir um intervalo robusto para preços de opções. Os outros dois artigos são sobre anúncios agendados em diferentes situações. O segundo se chama "Watching the News: Optimal Stopping Time and Scheduled Announcements" e estuda problemas de tempo de parada ótimo na presença de saltos numa data fixa em modelos de difusão com salto. Fornece resultados sobre a otimalidade do tempo de parada um pouco antes do anúncio. O artigo aplica os resultados ao tempo de exercício de Opções Americanas e ao tempo ótimo de venda de um ativo. Finalmente o terceiro artigo estuda um problema de carteira ótima na presença de custo fixo quando os preços podem saltar numa data fixa. Seu título é "Dynamic Portfolio Selection with Transactions Costs and Scheduled Announcement" e o resultado mais interessante é que o comportamento do investidor é consistente com estudos empíricos sobre volume de transações em momentos próximos de anúncios.

Optimal mean-variance control for discrete-time linear systems with Markovian jumps and multiplicative noises

In this paper, we consider the stochastic optimal control problem of discrete-time linear systems subject to Markov jumps and multiplicative noises under two criteria. The first one is an unconstrained mean-variance trade-off performance criterion along the time, and the second one is a minimum variance criterion along the time with constraints on the expected output. We present explicit conditions for the existence of an optimal control strategy for the problems, generalizing previous results in the literature. We conclude the paper by presenting a numerical example of a multi-period portfolio selection problem with regime switching in which it is desired to minimize the sum of the variances of the portfolio along the time under the restriction of keeping the expected value of the portfolio greater than some minimum values specified by the investor. (C) 2011 Elsevier Ltd. All rights reserved.

Modelling and testing volatility spillovers in oil and financial markets for USA, UK and China

The primary purpose of the paper is to analyze the conditional correlations, conditional covariances, and co-volatility spillovers between international crude oil and associated financial markets. The paper investigates co-volatility spillovers (namely, the delayed effect of a returns shock in one physical or financial asset on the subsequent volatility or co-volatility in another physical or financial asset) between the oil and financial markets. The oil industry has four major regions, namely North Sea, USA, Middle East, and South-East Asia. Associated with these regions are two major financial centers, namely UK and USA. For these reasons, the data to be used are the returns on alternative crude oil markets, returns on crude oil derivatives, specifically futures, and stock index returns in UK and USA. The paper will also analyze the Chinese financial markets, where the data are more recent. The empirical analysis will be based on the diagonal BEKK model, from which the conditional covariances will be used for testing co-volatility spillovers, and policy recommendations. Based on these results, dynamic hedging strategies will be suggested to analyze market fluctuations in crude oil prices and associated financial markets.

Community dynamics of stabilized dune xerophytic shrubs

Tese de doutoramento, Biologia (Ecologia), Universidade de Lisboa, Faculdade de Ciências, 2016

Geometry and Optimization of Relative Arbitrage

Thesis (Ph.D.)--University of Washington, 2016-06

Financial Decisions via Methods of Guaranteed Control Theory

AMS subject classification: 93C95, 90A09.

Virtuális árhatás a Budapesti Értéktőzsdén = Virtual price effects on the Budapest stock exchange

Az árhatásfüggvények azt mutatják meg, hogy egy adott értékű megbízás mekkora relatív árváltozást okoz. Az árhatásfüggvény ismerete a piaci szereplők számára fontos szerepet játszik a jövőben benyújtandó ajánlataikhoz kapcsolódó árhatás előrejelzésében, a kereskedés árváltozásból eredő többletköltségének becslésében, illetve az optimális kereskedési algoritmus kialakításában. Az általunk kidolgozott módszer révén a piaci szereplők a teljes ajánlati könyv ismerete nélkül egyszerűen és gyorsan tudnak virtuális árhatásfüggvényt meghatározni, ugyanis bemutatjuk az árhatásfüggvény és a likviditási mértékek kapcsolatát, valamint azt, hogy miként lehet a Budapesti Likviditási Mérték (BLM) idősorából ár ha tás függ vényt becsülni. A kidolgozott módszertant az OTP-részvény idősorán szemléltetjük, és a részvény BLM-adatsorából a 2007. január 1-je és 2011. június 3-a közötti időszakra virtuális árhatás függvényt becsülünk. Empirikus elemzésünk során az árhatás függ vény időbeli alakulásának és alapvető statisztikai tulajdonságainak vizsgálatát végezzük el, ami révén képet kaphatunk a likviditás hiányában fellépő tranzakciós költségek múltbeli viselkedéséről. Az így kapott információk például a dinamikus portfólióoptimalizálás során lehetnek a kereskedők segítségére. / === / Price-effect equations show what relative price change a commission of a given value will have. Knowledge of price-effect equations plays an important part in enabling market players to predict the price effect of their future commissions and to develop an optimal trading algorithm. The method devised by the authors allows a virtual price-effect equation to be defined simply and rapidly without knowledge of the whole offer book, by presenting the relation between the price-effect equation and degree of liquidity, and how to estimate the price-effect equation from the time line of the Budapest Liquidity Measure (BLM). The methodology is shown using the time line for OTP shares and the virtual price-effect equation estimated for the 1 January 2007 to 3 June 2011 period from the shares BML data set. During the empirical analysis the authors conducted an examination of the tendency of the price-effect equation over time and for its basic statistical attributes, to yield a picture of the past behaviour of the transaction costs arising in the absence of liquidity. The information obtained may, for instance, help traders in dynamic portfolio optimization.

Coordinated pricing and inventory management

This dissertation mainly focuses on coordinated pricing and inventory management problems, where the related background is provided in Chapter 1. Several periodic-review models are then discussed in Chapters 2,3,4 and 5, respectively. Chapter 2 analyzes a deterministic single-product model, where a price adjustment cost incurs if the current selling price is changed from the previous period. We develop exact algorithms for the problem under different conditions and find out that computation complexity varies significantly associated with the cost structure. %Moreover, our numerical study indicates that dynamic pricing strategies may outperform static pricing strategies even when price adjustment cost accounts for a significant portion of the total profit. Chapter 3 develops a single-product model in which demand of a period depends not only on the current selling price but also on past prices through the so-called reference price. Strongly polynomial time algorithms are designed for the case without no fixed ordering cost, and a heuristic is proposed for the general case together with an error bound estimation. Moreover, our illustrates through numerical studies that incorporating reference price effect into coordinated pricing and inventory models can have a significant impact on firms' profits. Chapter 4 discusses the stochastic version of the model in Chapter 3 when customers are loss averse. It extends the associated results developed in literature and proves that the reference price dependent base-stock policy is proved to be optimal under a certain conditions. Instead of dealing with specific problems, Chapter 5 establishes the preservation of supermodularity in a class of optimization problems. This property and its extensions include several existing results in the literature as special cases, and provide powerful tools as we illustrate their applications to several operations problems: the stochastic two-product model with cross-price effects, the two-stage inventory control model, and the self-financing model.

Optimal release strategies for biological control agents: an application of stochastic dynamic programming to population management

1. Establishing biological control agents in the field is a major step in any classical biocontrol programme, yet there are few general guidelines to help the practitioner decide what factors might enhance the establishment of such agents. 2. A stochastic dynamic programming (SDP) approach, linked to a metapopulation model, was used to find optimal release strategies (number and size of releases), given constraints on time and the number of biocontrol agents available. By modelling within a decision-making framework we derived rules of thumb that will enable biocontrol workers to choose between management options, depending on the current state of the system. 3. When there are few well-established sites, making a few large releases is the optimal strategy. For other states of the system, the optimal strategy ranges from a few large releases, through a mixed strategy (a variety of release sizes), to many small releases, as the probability of establishment of smaller inocula increases. 4. Given that the probability of establishment is rarely a known entity, we also strongly recommend a mixed strategy in the early stages of a release programme, to accelerate learning and improve the chances of finding the optimal approach.

Multi-agent electricity market simulation with dynamic strategies & virtual power producers

Distributed energy resources will provide a significant amount of the electricity generation and will be a normal profitable business. In the new decentralized grid, customers will be among the many decentralized players and may even help to co-produce the required energy services such as demand-side management and load shedding. So, they will gain the opportunity to be more active market players. The aggregation of DG plants gives place to a new concept: the Virtual Power Producer (VPP). VPPs can reinforce the importance of these generation technologies making them valuable in electricity markets. In this paper we propose the improvement of MASCEM, a multi-agent simulation tool to study negotiations in electricity spot markets based on different market mechanisms and behavior strategies, in order to take account of decentralized players such as VPP.

Dynamic delta hedging of autocallables under a discrete rebalancing context

This work tests different delta hedging strategies for two products issued by Banco de Investimento Global in 2012. The work studies the behaviour of the delta and gamma of autocallables and their impact on the results when delta hedging with different rebalancing periods. Given its discontinuous payoff and path dependency, it is suggested the hedging portfolio is rebalanced on a daily basis to better follow market changes. Moreover, a mixed strategy is analysed where time to maturity is used as a criterion to change the rebalancing frequency.

Modeling Dependence Structure and Forecasting Portfolio Value-at-Risk with Dynamic Copulas

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness, cokurtosis and order flows), and find substantial evidence of dynamic evolution between the high beta (respectively, coskewness, cokurtosis and order flow) portfolios and the low beta (coskewness, cokurtosis and order flow) portfolios. Second, using three different dependence measures, we show the presence of asymmetric dependence between these characteristic-sorted portfolios. Third, we use a dynamic copula framework based on Creal et al. (2013) and Patton (2012) to forecast the portfolio Value-at-Risk of long-short (high minus low) equity and FX portfolios. We use several widely used univariate and multivariate VaR models for the purpose of comparison. Backtesting our methodology, we find that the asymmetric dynamic copula models provide more accurate forecasts, in general, and, in particular, perform much better during the recent financial crises, indicating the economic significance of incorporating dynamic and asymmetric dependence in risk management.

Nash equilibrium strategies in discrete-time finite-horizon dynamic games with risk-and effort-averse players

The objective of this paper is to re-examine the risk-and effort attitude in the context of strategic dynamic interactions stated as a discrete-time finite-horizon Nash game. The analysis is based on the assumption that players are endogenously risk-and effort-averse. Each player is characterized by distinct risk-and effort-aversion types that are unknown to his opponent. The goal of the game is the optimal risk-and effort-sharing between the players. It generally depends on the individual strategies adopted and, implicitly, on the the players' types or characteristics.