Quantitative finance and risk management: a physicist's approach
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[2016]
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| Edition: | Second edition |
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| adam_text | Titel: Quantitative finance and risk management
Autor: Dash, Jan W
Jahr: 2016
Table of Contents
Acknowledgments for the 1st and 2nd Editions...................................................xxi
PART I: INTRODUCTION, OVERVIEW, AND EXERCISE........................1
1. Introduction / Outline; Note for 2nd Edition; Unresolved Problems............3
Who/ How/What, Tech. Index , Messages, Personal Note..................................3
Summary Outline: Book Contents..........................................................................5
Note for the 2nd Edition (2015)...............................................................................6
Climate Change Risk Management - NEW TOPIC...............................................7
Evaluation - Where do we stand? What about the future?.....................................7
2. Overview (Tech. Index 1/10)......................................................................9
Objectives of Quantitative Finance and Risk Management...................................9
Tools of Quantitative Finance and Risk Management.........................................11
The Traditional Areas of Risk Management........................................................14
When Will We Ever See Real-Time Color Movies of Risk?...............................16
Many People Participate in Risk Management.....................................................16
Quants in Quantitative Finance and Risk Management.......................................18
References............................................................................................................21
3. An Exercise (Tech. Index 1/10)................................................................23
Part #1: Data, Statistics, and Reporting Using a Spreadsheet..............................23
Part #2: Repeat Part #1 Using Programming........................................................26
Part #3: A Few Quick and Tricky Hypothetical Questions..................................27
Messages and Advice...........................................................................................28
References............................................................................................................28
PART II: RISK LAB (NUTS AND BOLTS OF RISK MANAGEMENT)......29
4. Equity Options (Tech. Index 3/10)............................................................31
Pricing and Hedging One Option.........................................................................31
American Options.................................................................................................34
Basket Options and Index Options.......................................................................35
Other Types of Equity Options; Exotics...............................................................37
Portfolio Risk (Introduction)................................................................................37
Scenario Analysis (Introduction)..........................................................................37
References............................................................................................................38
5. FX Options (Tech. Index 4/10).................................................................39
FX Forwards and Options....................................................................................39
Some Practical Details for FX Options................................................................43
Hedging FX Options with Greeks: Details and Ambiguities...............................44
FX Volatility Skew and/or Smile.........................................................................46
Pricing Barrier Options with Skew.......................................................................51
Double Barrier Option: Practical Example...........................................................52
The Two-Country Paradox ................................................................................54
Quanto Options and Correlations.........................................................................56
FX Options in the presence of Stochastic Interest Rates......................................57
Numerical Codes, Closed Form Sanity Checks, and Intuition.............................57
References............................................................................................................58
6. Equity Volatility Skew (Tech. Index 6/10)...............................................59
Put-Call Parity: Theory and Violations................................................................60
The Volatility Surface..........................................................................................61
Dealing with Skew...............................................................................................62
Perturbative Skew and Barrier Options................................................................62
Static Replication..................................................................................................65
Stochastic Volatility.............................................................................................66
Local Volatility and Skew....................................................................................69
The Skew-Implied Probability Distribution.........................................................70
Local vs. Implied Volatility Skew; Derman s Rules of Thumb...........................70
Option Replication with Gadgets.........................................................................72
Intuitive Models and Different Volatility Regimes..............................................75
The Macro-Micro Model and Equity Volatility Regimes....................................76
Jump Diffusion Processes.....................................................................................76
Appendix 1: Algorithm for Perturbative Skew Approach................................76
Appendix 2: A Technical Issue for Stochastic Volatility.....................................78
References............................................................................................................79
7. Forward Curves (Tech. Index 4/10)..........................................................81
Market Input Rates...............................................................................................81
Construction of the Forward-Rate Curve.............................................................84
References............................................................................................................92
8. Interest-Rate Swaps and Credit Default Swaps (Tech. Index 5/10)..........93
Interest Rate Swaps: Pricing and Risk..................................................................93
Interest Rate Swaps: Pricing and Risk Details...................................................100
Cross-Currency Swaps.......................................................................................116
Credit Default Swaps (CDS)..............................................................................117
References..........................................................................................................122
9. Bonds: An Overview (Tech. Index 2/10)................................................123
Types of Bonds...................................................................................................123
Bond Issuance.....................................................................................................127
Bond Trading......................................................................................................129
Flight to Quality.................................................................................................129
Bond Math..........................................................................................................130
References..........................................................................................................134
10. Interest-Rate Caps (Tech. Index 4/10)..................................................137
Introduction to Caps...........................................................................................137
The Black Caplet Formula..................................................................................139
Non-USD Caps...................................................................................................141
Relations between Caps, Floors, and Swaps......................................................142
Hedging Delta and Gamma for Libor Caps........................................................142
Hedging Volatility and Vega Ladders................................................................143
Matrices of Cap Prices........................................................................................145
Prime Caps and a Vega Trap..............................................................................145
CMT Rates; Volatility Dependence of CMT Products.......................................147
References..........................................................................................................151
11. Interest-Rate Swaptions (Tech. Index 5/10)..........................................153
European Swaptions...........................................................................................153
Bermuda/American Swaption Pricing................................................................157
Delta and Vega Risk: Move Inputs or Forwards?..............................................159
Swaptions and Corporate Liability Risk Management.......................................160
Practical Example: A Deal Involving a Swaption..............................................162
Miscellaneous Swaption Topics.........................................................................164
References..........................................................................................................167
12. Portfolios and Scenarios (Tech. Index 3/10).........................................169
Introduction to Portfolio Risk Using Scenario Analysis....................................169
Definitions of Portfolios.....................................................................................169
Definitions of Scenarios.....................................................................................171
Many Portfolios and Scenarios...........................................................................174
A Scenario Simulator.........................................................................................175
Risk Analyses and Presentations........................................................................175
PART III: EXOTICS, DEALS, AND CASE STUDIES.............................177
13. A Complex CVR Option (Tech. Index 5/10)........................................179
The M A Scenario............................................................................................179
CVR Starting Point: A Put Spread.....................................................................180
CVR Extension Options and Other Complications............................................180
The Arbs and the Mispricing of the CVR Option...............................................182
A Simplified CVR: Two Put Spreads with Extension Logic.............................183
Non-Academic Corporate Decision for Option Extension.................................185
The CVR Option Pricing....................................................................................187
Analytic CVR Pricing Methodology..................................................................191
Some Practical Aspects of CVR Pricing and Hedging.......................................194
The CVR Buyback.............................................................................................198
A Legal Event Related to the CVR....................................................................198
References..........................................................................................................199
14. Two More Case Studies (Tech. Index 5/10).........................................201
Case Study: DECS and Synthetic Convertibles.................................................201
Credit Spreads, Discounting, Convertibles, and DECs......................................204
D123 : The Complex DEC Synthetic Convertible................................................207
Case Study: Equity Call with Variable Strike and Expiration............................211
References..........................................................................................................218
15. More Exotics and Risk (Tech. Index 5/10)...........................................219
Contingent Caps.................................................................................................219
Digital Options: Pricing and Hedging................................................................223
Historical Simulations and Hedging...................................................................225
Yield-Curve Shape and Principal-Component Options......................................227
Principal-Component Risk Measures (Tilt Delta etc.).......................................228
Hybrid 2-Dimensional Barrier Options—Examples..........................................229
Reload Options...................................................................................................232
References..........................................................................................................236
16. A Pot Pourri of Deals (Tech. Index 5/10).............................................237
TIPS (Treasury Inflation Protected Securities)..................................................237
Municipal Derivatives, Muni Issuance, Derivative Hedging.............................240
Difference Option on an Equity Index and a Basket of Stocks..........................243
Resettable Options: Cliquets..............................................................................244
Power Options....................................................................................................248
Path-Dependent Options and Monte Carlo Simulation......................................249
Periodic Caps......................................................................................................249
ARM Caps..........................................................................................................250
Index-Amortizing Swaps....................................................................................251
A Hypothetical Repo + Options Deal.................................................................254
Convertible Issuance Risk..................................................................................258
References..........................................................................................................259
17. Single Barrier Options (Tech. Index 6/10)............................................261
Knock-Out Options............................................................................................263
The Semi-Group Property including a Barrier...................................................265
Calculating Barrier Options................................................................................266
Knock-In Options...............................................................................................267
Useful Integrals for Barrier Options...................................................................269
Single Barrier Rebates at Touch and at Maturity...............................................271
Other Topics Involving Single Barrier Options..................................................272
References..........................................................................................................276
18. Double Barrier Options (Tech. Index 7/10)..........................................277
Double Barrier Solution with an Infinite Set of Images.....................................278
Double Barrier Option Pricing...........................................................................280
Rebates for Double Barrier Options...................................................................282
References..........................................................................................................284
19. Hybrid 2-D Barrier Options (Tech. Index 7/10)...................................285
Pricing the Barrier 2-Dimension Hybrid Options...............................................288
Useful Integrals for 2D Barrier Options.............................................................289
References..........................................................................................................290
20. Average-Rate Options (Tech. Index 8/10)............................................291
Arithmetic Average Rate Options in General Gaussian Models........................292
Results for Average-Rate Options in the MRG Model......................................296
Simple Harmonic Oscillator Derivation for Average Options...........................297
Thermodynamic Identity Derivation for Average Options...............................298
Average Options with Log-Normal Rate Dynamics..........................................298
Gaussian into Lognormal Using a Simple Trick................................................299
References..........................................................................................................300
PART IV: QUANTITATIVE RISK MANAGEMENT.................................301
21. Fat Tail Volatility (Tech. Index 5/10)...................................................303
Gaussian Behavior and Deviations from Gaussian............................................303
Review of Some Math Formalism......................................................................303
Outliers and Fat Tails.........................................................................................304
Use of the Equivalent Gaussian Fat-Tail Volatility............................................307
Practical Considerations for the Fat-Tail Parameters.........................................309
Overlapping vs. Non-overlapping Windows and Data.......................................311
References..........................................................................................................315
22. Correlation Matrix Formalism and the /Af - Sphere
(Tech. Index 8/10)................................................................................317
The Importance and Difficulty of Correlation Risk...........................................317
One Correlation in Two Dimensions..................................................................318
Two Correlations in Three Dimensions; the Azimuthal Angle..........................319
Correlations in Four Dimensions - Picture.........................................................322
Correlations in Five and Higher Dimensions.....................................................324
Spherical Representation of the Cholesky Decomposition................................326
References..........................................................................................................328
23. Stressed Correlations and Random Matrices (Tech. Index 5/10)..........329
Correlation Stress Scenarios Using Data............................................................329
Stressed Random Correlation Matrices..............................................................335
Stochastic Correlation Matrices Using the N -sphere....................................337
24. Optimally Stressed PD Correlation Matrices (Tech. Index 7/10).........341
Least-Squares Fitting for the Optimal PD Stressed Matrix................................343
Numerical Considerations for Optimal PD Stressed Matrix..............................344
Example of Optimal PD Fit to a NPD Stressed Matrix......................................345
SVD Algorithm for the Starting PD Correlation Matrix....................................347
PD Stressed Correlations by Walking through the Matrix ..............................350
Nearest Neighbor Technique for PD Stressed Correlations...............................350
References..........................................................................................................351
25. Models for Correlation Dynamics, Uncertainties (Tech. Index 6/10)...353
Just Make the Correlations Zero Model; Three Versions...............................353
Long-Term vs. Short-Term Correlations; Macro-Micro Model.........................355
Macro Long-term Correlation Simulation Example...........................................356
Macro Moves for the Whole Correlation Matrix................................................359
Correlation Dependence on Volatility................................................................360
Implied, Current, and Historical Correlations for Baskets.................................363
SSA and Noise-Reduced Correlations - Preview...............................................364
Factor Models, Idiosyncratic Risk, and Correlations.........................................364
Correlated Idiosyncratic Residuals and Applications.........................................366
References..........................................................................................................367
26. Plain-Vanilla VAR and Component VAR (Tech. Index 4/10).............369
Historical VAR (HVAR) and Monte Carlo HVAR............................................372
Scenarios............................................................................................................375
Quadratic VAR and Component VARs (CVARs).............................................376
Monte-Carlo VAR..............................................................................................378
Backtesting VAR................................................................................................379
Component VAR (CVAR) and CVAR Volatility from MC..............................380
Confidence Levels for Individual Variables in VAR.........................................382
References..........................................................................................................384
27. Enhanced/Stressed VAR (Tech. Index 5/10)........................................385
Improved Plain-Vanilla VAR (IPV-VAR)..........................................................385
Regulatory Stressed VAR, Turbulent VAR, VAR Uncertainty.........................389
Enhanced/Stressed VAR ....................................................................390
Illiquidity Penalty for Enhanced VAR...............................................................392
Subadditivity, Integrated VAR, Backtesting......................................................398
Bayesian/Scenario VAR .................................................................................401
References..........................................................................................................401
28. VAR, CVAR, CVAR Volatility Formalism (Tech. Index 7/10)...........403
Set-up and Overview of the Formal VAR Results.............................................403
Calculation of the Generating Function..............................................................405
VAR, CVARs (= Component VARs), CVAR Volatilities.................................408
Effective Number of SD for Underlying Variables............................................411
Extension to Multiple Time Steps using Path Integrals......................................413
29. VAR and Component VAR for Two Variables (Tech. Index 5/10).....415
The Component VAR (CVAR) Volatility with Two Variables.........................415
Geometry, Math: Risk Ellipse, VAR Line, CVAR, CVAR Vol........................416
30. Corporate-Level VAR (Tech. Index 3/10)............................................421
Aggregation, Desks, Business Units, Corporate Hierarchy................................421
Desk CVARs and Correlations between Desk Risks.........................................423
Aged Inventory and Illiquidity...........................................................................425
References..........................................................................................................427
31. Credit Risk: Issuer, Counterparty (Tech. Index 5/10)..........................429
Issuer Credit Risk...............................................................................................429
Transition/Default Probability Matrices and Issuer Risk...................................431
Calculation of Issuer Risk - Generic Case..........................................................435
Monte-Carlo Simulations of Credit Issuer Risk.................................................437
Simple Example of Issuer Credit Risk Calculation............................................440
Issuer Credit Risk and Market Risk: Separation via Spreads.............................443
Separating Market and Credit Risk without Double Counting...........................444
A Unified Credit + Market Risk Model..............................................................447
Counterparty Credit Risk Example: Swaps........................................................450
CVA Risk Neutral and PEE Real World Simulations.................................453
PFE and the Macro-Micro Model.......................................................................454
Correlated Defaults - Analytic Results for 20 Merton Model...........................454
Misc. Topics: WWR, EVA, Factor Models, Firmwide Risk..............................457
Regulations.........................................................................................................459
References..........................................................................................................459
32. Model Risk Overview (Tech. Index 3/10)............................................463
Summary of Model Risk....................................................................................463
Model Risk and Risk Management....................................................................464
Time Scales and Models.....................................................................................464
Long-Term Macro Component with Quasi-Random Behavior..........................465
Liquidity Model Limitations..............................................................................465
Which Model Should We Use?..........................................................................466
Psychology and Models......................................................................................466
Model Risk, Model Reserves, and Bid-Offer Spreads.......................................467
Model Quality Assurance...................................................................................468
Models and Parameters.......................................................................................468
References..........................................................................................................469
33. Model Quality Assurance (Tech. Index 4/10).......................................471
Model Quality Assurance Goals, Activities, and Procedures.............................471
Model QA: Sample Documentation...................................................................475
User Section of Model QA Documentation.......................................................475
Quantitative Section of Model QA Documentation...........................................476
Systems Section of Model QA Documentation..................................................479
References..........................................................................................................480
34. Systems Risk Overview (Tech. Index 3/10).........................................483
Advice and a Message to Non-Technical Managers..........................................483
What are the Three-Fives Systems Criteria ?...................................................483
What is the Fundamental Theorem of Systems Risk?........................................484
What are Some Systems Traps and Risks?.........................................................484
The Birth and Development of a System............................................................486
Systems Risk in Mergers and Startups...............................................................488
Vendor Systems Risk.........................................................................................488
New Paradigms in Systems and Parallel Processing..........................................490
Languages for Models: Fortran 90, C++, C, Python, Others...............................490
What s the Systems Solution ?.........................................................................492
Are Software Development Risks Unique to Wall Street?.................................492
References..........................................................................................................494
35. Strategic Computing (Tech. Index 3/10)...............................................495
Introduction and Background.............................................................................496
Illustration of Parallel Processing for Finance...................................................496
Some Aspects of Parallel Processing..................................................................497
Technology, Strategy and Change......................................................................500
References..........................................................................................................501
36. Data Risk: Qualitative, SSA, Generalized z-Score Polynomials (Tech.
Index 5/10).....................................................................................................503
Important Qualitative Aspect of Data Risk........................................................503
NEW TOPIC: SSA, MSSA, and Data Smoothing/Cleaning..............................506
NEW: Generalized z-scores: General Measure Polynomials.............................510
References..........................................................................................................511
37. Correlations, Data, and Random Matrix Theory (Tech. Index 6/10)....513
Fluctuations and Uncertainties in Measured Correlations..................................513
Time Windowing................................................................................................514
Correlations, the Number of Data Points, and Variables....................................517
Intrinsic and Windowing Uncertainties: Example..............................................518
The Fisher Transform for Correlations...............................................................519
NEW: Noise-Cleaned Correlations via SSA......................................................520
Random Matrix Theory Benchmarks for Noise in Correlations.........................521
NEW: Approximate Analytic Probability Distribution for ANY Eigenvalue in the
Zero-Correlation Wishart Matrix........................................................................522
A Few Other Aspects of Data and Correlations.................................................524
References..........................................................................................................524
38. Wishart s Theorem and Fisher s Transform (Tech. Index 9/10)...........527
Warm Up: The Distribution for a Volatility Estimate........................................528
The Wishart Distribution....................................................................................530
The Probability Function for One Estimated Correlation...................................532
Fisher s Transform and the Correlation Probability Function............................533
NEW: Hedge Fund Style-Change Risk and Correlation Changes......................535
Derivation - Fourier Transform of the Wishart Distribution..............................535
Result - Wishart Distribution Fourier Transform...............................................537
References..........................................................................................................540
39. Economic Capital (Tech. Index 4/10)...................................................541
Basic Idea of Economic Capital.........................................................................541
The Classification of Risk Components of Economic Capital...........................545
Exposures for Economic Capital: What Should They Be?.................................546
Attacks on Economic Capital at High CL..........................................................546
Allocation: Standalone, Component VAR, or Other?........................................548
The Cost of Economic Capital............................................................................550
An Economic-Capital Utility Function...............................................................550
Firm wide Sharpe Ratio and Economic Capital.................................................551
Revisiting Expected Losses; the Importance of Time Scales.............................552
Traditional Measures of Capital.........................................................................554
References..........................................................................................................555
40. Unused-Limit Risk (Tech. Index 5/10).................................................557
General Aspects of Risk Limits..........................................................................557
The Unused Limit Risk Model: Overview.........................................................559
Unused Limit Economic Capital for Issuer Credit Risk.....................................565
PART V: PATH INTEGRALS, GREEN FUNCTIONS, AND OPTIONS..567
41. Path Integrals and Options: Overview (Tech. Index 4/10)....................569
42. Path Integrals and Options I: Introduction (Tech. Index 7/10).............573
Introduction to Path Integrals.............................................................................574
Heretical Remarks on Rigor and All That..........................................................576
Path-Integral Warm-up: The Black Scholes Model............................................577
Connection of Path Integral with the Stochastic Equations................................589
Dividends and Jumps with Path Integrals...........................................................591
Discrete Bermuda Options..................................................................................598
American Options...............................................................................................606
Appendix 1: Girsanov s Theorem and Path Integrals.........................................606
Appendix 2: A Short Dictionary of Common Notations....................................610
Appendix 3: No-Arbitrage, Hedging and Path Integrals....................................611
Appendix 4: Perturbation Theory, Local Volatility, Skew.................................616
Figure Captions for this Chapter........................................................................616
References..........................................................................................................626
43. Path Integrals and Options II: Interest Rates (Tech. Index 8/10)..........629
I. Path Integrals: Review....................................................................................631
II. The Green Function; Discretized Gaussian Models......................................632
III. The Continuous-Time Gaussian Limit.........................................................636
IV. Mean-Reverting Gaussian (MRG) Models..................................................639
IV Continued: Numeraires.................................................................................643
Notation: Connection with Hull-White (HW)....................................................646
V. The Most General Model with Memory........................................................648
VI. Wrap-Up for this Chapter.............................................................................652
Appendix A: MRG Formalism, Stochastic Equations, Etc...............................653
Appendix B: Rate-Dependent Volatility (Local Vol) Models............................661
Appendix C: The General Gaussian Model With Memory................................663
Figure Captions for This Chapter.......................................................................665
References..........................................................................................................668
44. Path Integrals and Options III: Numerical (Tech. Index 6/10).............673
Path Integrals and Common Numerical Methods...............................................674
The Binomial Approximation to a Monte Carlo Simulation..............................675
Basic Numerical Procedure using Path Integrals................................................676
The Castresana-Hogan Path-Integral Discretization..........................................679
Path Integrals, MC Simulation, Lattices, and Brownian Bridges.......................684
Monte Carlo Simulation Using Path Integrals - Illustration:..............................686
Smart Monte Carlo (SMC).................................................................................688
American Monte Carlo (AMC)..........................................................................689
New Interpolation Methods for SMC and AMC................................................692
Greeks and Path Integrals...................................................................................694
Normal Integral Approximations........................................................................696
Perturbation Expansion for Multivariate Gaussian Integrals..............................697
Appendix 1: Back-Chaining Bermuda Algorithm, Critical Path........................698
Appendix 2: Some Aspects of Numerical Uncertainties....................................700
Appendix 3: Numerical Approximation Methods..............................................703
Appendix 4: Some other Numerical Methods in the Literature..........................708
References..........................................................................................................709
45. Path Integrals and Options IV: Multiple Factors (Tech. Index 9/10)....711
Calculating Options with Multidimensional Path Integrals................................714
Principal-Component Path Integrals...................................................................715
Multi-dimensional Monte Carlo Simulation.......................................................716
References 716
46. The Reggeon Field Theory, Markets in Crises, and Predicting Crises
(Tech. Index 10/10)......................................717
Introduction to the Reggeon Field Theory (RFT)...............................................717
Summary of the RFT in Physics.........................................................................718
Aspects of Applications of the RFT to Finance..................................................723
The RFT and Describing Financial Crises (2nd Edition).....................................724
RFT Scaling Without Fitting for Various Markets In Crisis..............................724
Rich-Cheap Analysis, the RFT, and Crises........................................................725
RFT - the Natural Extension to Brownian Motion.............................................725
Predicting Crises in Equity Markets; an Earthquake Analogy...........................726
Finance Theory is Really Phenomenology.........................................................728
References..........................................................................................................728
PART VI; THE MACRO-MICRO MODEL...............................................731
47. The Macro-Micro Model and Trend Risk; Overview (Tech. Index 4/10)
733
Explicit Time Scales Separating Dynamical Regions........................................733
I. The Macro-Micro Yield-Curve Model: Ch. 48-50..........................................734
II. Further Developments for the Macro-Micro Model: Ch. 51.........................738
III. A Function Toolkit: Ch. 52...........................................................................739
References..........................................................................................................740
48. A Multivariate Yield-Curve Lognormal Model and Yield-Curve Kinks
(Tech. Index 6/10)..........................................................................................741
Summary of this Chapter....................................................................................741
The Problem of Kinks in Yield Curves for Models............................................742
I. Introduction to this Chapter.............................................................................742
IIA. Statistical Probes, Data, Quasi-Equilibrium Drift.......................................745
IIB. Yield-Curve Kinks: Bete Noire of Yield Curve Models.............................747
III. EOF / Principal Component Analysis..........................................................749
IV. Simpler Lognormal Model with Three Variates..........................................750
V. Wrap-Up and Preview of the Next Chapters.................................................751
Appendix A: Definitions and Stochastic Equations...........................................752
Appendix B: EOF or Principal-Component Formalism.....................................754
Sub-Period Centered Principal Components...................................................760
Figures: Multivariate Lognormal Yield-Curve Model.......................................761
References..........................................................................................................775
49. Strong Mean-Reverting Multifactor YC Model and the 3rd Order Green
Function (Tech. Index 7/10)...........................................................................777
Summary of this Chapter....................................................................................777
Introduction to this Chapter................................................................................778
Short and Long Time Scales...............................................................................780
Cluster Decomposition Analysis and the SMRG Model....................................781
Third-Order Correlation Functions.....................................................................782
Historical Quasi-Equilibrium Yield Curve Path for Data...................................785
Large Value of the Mean Reversion in this Model.............................................786
Physical Picture - How Interest Rates Really Seem to Behave..........................787
Other Statistical Tests and the SMRG Model....................................................788
Principal Components (EOFs) and the SMRG Model.......................................790
Wrap-Up for this Chapter...................................................................................791
Appendix A: Definitions and Stochastic Equations...........................................792
Appendix B: The Cluster-Decomposition Analysis (CDA)...............................794
Figures: Strong Mean-Reverting Multifactor Yield-Curve Model.....................798
References..........................................................................................................812
50. The Macro-Micro Yield-Curve Model (Tech. Index 5/10)...................813
Summary of this Chapter....................................................................................813
Introduction to this Chapter................................................................................814
Spectral Decomposition and Time Scales..........................................................815
The Macro Component and Macroeconomics....................................................815
The Micro Component and Short-Term Trading Activity.................................816
Prototype: Prime (Macro) and Libor (Macro + Micro)......................................817
Details of the Macro-Micro Yield-Curve Model................................................817
Model for the Random Macro Time Step Dynamics..........................................818
Wrap-Up of this Chapter....................................................................................820
Appendix A. No Arbitrage and Yield-Curve Dynamics....................................821
Figures: Macro-Micro Model.............................................................................823
References..........................................................................................................827
51. Macro-Micro Model: Further Developments (Tech. Index 6/10).........829
Summary of This Chapter..................................................................................829
Using SSA to determine the Macro Component................................................829
Intuition: Short to Long Times - Volatility, No-Arbitrage.................................830
The Macro-Micro Model applied to FX and Equity Markets.............................831
Formal Developments in the Macro-Micro Model.............................................833
No Arbitrage and the Macro-Micro Model: Formal Aspects.............................835
Hedging, Forward Prices, No Arbitrage, Options (Equities)..............................837
Satisfying the Interest-Rate Term-Structure Constraints....................................840
Chaos and the Macro-Micro Model....................................................................841
Technical Analysis and the MM Model.............................................................844
The Macro-Micro Model and Data.....................................................................845
Finance Models Related to the Macro-Micro Model.........................................848
Macroeconomics, Economics Literature, Macro-Micro Model.........................849
References..........................................................................................................852
52. A Function Toolkit (Tech. Index 6/10).................................................855
Time Thresholds; Time and Frequency; Oscillations.........................................856
Summary of Desirable Properties of Toolkit Functions.....................................857
Construction of the Toolkit Functions................................................................857
Relation of the Function Toolkit to Other Approaches......................................862
Example of Standard Micro Noise Plus Macro Signal ................................864
The Total Macro: Quasi-Random Trends + Toolkit Cycles...............................867
Short-Time Micro Regime, Trading, and the Function Toolkit.........................868
Appendix: Wavelets, Completeness, and the Function Toolkit.........................869
References..........................................................................................................871
PART VII: CLIMATE CHANGE RISK MANAGEMENT..........................873
53. Climate Change Risk Management: Business, Economy, Finance, Society
(Tech. Index 5/10)..........................................................................................875
Summary: Climate Change Risk Management..................................................875
Climate Change Risk Management - Formal Structure.....................................878
Finance, Economics, Risks, and Opportunities..................................................885
Positive Opportunities in Mitigating Climate Change........................................888
Long-term discounting for climate change impacts in the future.......................890
Climate-Change-Induced Economic and Financial Crises?...............................895
Business, Investors, Regulators, and Climate Change Risks..............................896
Economic Models Related to Climate Change Impacts.....................................899
Wrap Up of Climate Risk Management.............................................................902
Epilogue..............................................................................................................902
Appendix I. The Physical Science Basis of Climate Change.............................903
Appendix II. Impacts of Climate Change and Vulnerabilities...........................906
Appendix III. Mitigation and Adaption for Climate Change.............................911
Appendix IV. Risk from Climate Contrarian Obstruction..................................919
References..........................................................................................................932
INDEX: CH. 1 -Ch. 52....................................................................................967
INDEX: Climate Change Risk Management, Ch. 53 ............................981
|
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| indexdate | 2024-07-10T07:05:55Z |
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| spelling | Dash, Jan W. Verfasser (DE-588)1106268946 aut Quantitative finance and risk management a physicist's approach Jan W. Dash Second edition New Jersey ; London ; Singapore ; Beijing ; Shanghai ; Hong Kong ; Taipei ; Chennai ; Tokyo World Scientific [2016] xxi, 986 Seiten Illustrationen txt rdacontent n rdamedia nc rdacarrier Finanzmathematik (DE-588)4017195-4 gnd rswk-swf Bewertung Mathematik (DE-588)4394368-8 gnd rswk-swf Mathematisches Modell (DE-588)4114528-8 gnd rswk-swf Risikomanagement (DE-588)4121590-4 gnd rswk-swf Kapitalmarkt (DE-588)4029578-3 gnd rswk-swf Finanzinstrument (DE-588)4461672-7 gnd rswk-swf Kapitalmarkt (DE-588)4029578-3 s Finanzinstrument (DE-588)4461672-7 s Bewertung Mathematik (DE-588)4394368-8 s Risikomanagement (DE-588)4121590-4 s 1\p DE-604 Finanzmathematik (DE-588)4017195-4 s Mathematisches Modell (DE-588)4114528-8 s 2\p DE-604 HBZ Datenaustausch application/pdf http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=028046513&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA Inhaltsverzeichnis 1\p cgwrk 20201028 DE-101 https://d-nb.info/provenance/plan#cgwrk 2\p cgwrk 20201028 DE-101 https://d-nb.info/provenance/plan#cgwrk |
| spellingShingle | Dash, Jan W. Quantitative finance and risk management a physicist's approach Finanzmathematik (DE-588)4017195-4 gnd Bewertung Mathematik (DE-588)4394368-8 gnd Mathematisches Modell (DE-588)4114528-8 gnd Risikomanagement (DE-588)4121590-4 gnd Kapitalmarkt (DE-588)4029578-3 gnd Finanzinstrument (DE-588)4461672-7 gnd |
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| title | Quantitative finance and risk management a physicist's approach |
| title_auth | Quantitative finance and risk management a physicist's approach |
| title_exact_search | Quantitative finance and risk management a physicist's approach |
| title_full | Quantitative finance and risk management a physicist's approach Jan W. Dash |
| title_fullStr | Quantitative finance and risk management a physicist's approach Jan W. Dash |
| title_full_unstemmed | Quantitative finance and risk management a physicist's approach Jan W. Dash |
| title_short | Quantitative finance and risk management |
| title_sort | quantitative finance and risk management a physicist s approach |
| title_sub | a physicist's approach |
| topic | Finanzmathematik (DE-588)4017195-4 gnd Bewertung Mathematik (DE-588)4394368-8 gnd Mathematisches Modell (DE-588)4114528-8 gnd Risikomanagement (DE-588)4121590-4 gnd Kapitalmarkt (DE-588)4029578-3 gnd Finanzinstrument (DE-588)4461672-7 gnd |
| topic_facet | Finanzmathematik Bewertung Mathematik Mathematisches Modell Risikomanagement Kapitalmarkt Finanzinstrument |
| url | http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&local_base=BVB01&doc_number=028046513&sequence=000001&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA |
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