Is it Mathematics or is it Software? (link to pdf) Forthcoming in Notices of the American Mathematical Society, CDAR Co-Director Lisa Goldberg explores the concepts and issues surrounding mathematical software development. From the abstract: “Since we are in an age where significant progress has been achieved on both practical and intellectual levels by such thinking, the development of mathematical software is genuinely part of mathematics. That is, the conceptual breakthroughs in software development should find a home in the academic mathematical community.”
CDAR encourages innovative thinking in data science research and its applications to investment risk and portfolio management. With support from State Street, as well as the Economics and Statistics Departments at UC Berkeley, CDAR organizes workshops, conferences, and research opportunities to create a culture of learning. These events bring together academic researchers in physical and social sciences and industry researchers from finance firms and technology companies both large and small.
Join us for the annual CDAR Symposium
October 7, 2016 at California Memorial Stadium (Register here)
Data science is changing financial markets and is now particularly applicable to developing better risk analytics. Please join us to learn more about this at the second annual symposium hosted by Berkeley’s Consortium for Data Analytics in Risk. The symposium features plenary talks by Craig Boutilier, principal scientist at Google; Dan diBartolomeo, CEO of Northfield Information Services; and Mike Jordan Professor of Statistics and Computer Science at UC Berkeley. Jeff Bohn of State Street Global Exchange will lead a discussion on the impact of emerging ESG (Economic, Social, and Corporate Governance) standards and practices.
Lisa Goldberg and Alex Shkolnik to speak at Stanford’s Center for Financial Risk Analytics
October 13, 2016 at Stanford University, California (link to website)
The Center for Financial and Risk Analytics at Stanford University pioneers financial models, statistical tools, computational algorithms, and software to address the challenges that arise in this context.
Baeho Kim, CDAR Visiting Researcher, to present at FMA International’s 2016 Annual Meeting
October 19-22 2016 in Las Vegas, Nevada (link to website)
A Smiling Bear in the Equity Options Market and the Cross-section of Stock Returns
Abstract: We propose a measure for the convexity of an option-implied volatility curve, IV convexity, as a forward-looking measure of excess tail-risk contribution to the perceived variance of underlying equity returns. Using equity options data for individual U.S.-listed stocks during 2000-2013, we find that the average return differential between the lowest and highest IV convexity quintile portfolios exceeds 1% per month, which is both economically and statistically significant on a risk-adjusted basis. Our empirical findings indicate that informed options traders anticipating heavier tail risk proactively induce leptokurtic implied distributions of underlying stock returns before equity investors express their tail-risk aversion.
CDAR Co-Director Lisa Goldberg to present Moskowitz Prize at 2016 SRI Conference
November 9-11, 2016 in Denver, Colorado (link to website)
The SRI Conference – on Sustainable, Responsible, Impact Investing serves thought leaders, investors, and investment professionals in the ESG, Shareowner Advocacy, and Impact Investing space. Together, we are catalyzing the shift to a more socially equitable and environmentally sustainable economy. The Moskowitz Prize is a global award that recognizes outstanding academic research on a topic germane to the field of sustainable, responsible, impact (SRI) investment industry.
Alex Papanicolaou, Senior Data Scientist at Integral Development Corp., to speak at The 2016 INFORMS Annual Meeting at the Music City Center & Omni Nashville Hotel
November 13-16, 2016 in Nashville, Tennessee (link to website)
The INFORMS 2016 will feature plenaries and keynotes; panel discussions; tutorials; and thousands of oral and poster presentations from leading academics, industry experts, students, and representatives of government agencies. Alex will be presenting his current research project.
Alex Papanicolaou, Senior Data Scientist at Integral Development Corp., to speak at the SIAM Conference on Financial Mathematics & Engineering
November 17-19, 2016 in Nashville, Tennessee (link to website)
The Activity Group on Financial Mathematics and Engineering focuses on research and practice in financial mathematics, computation, and engineering. Its goals are to foster collaborations among mathematical scientists, statisticians, computer scientists, computational scientists, and researchers and practitioners in finance and economics, and to foster collaborations in the use of mathematical and computational tools in quantitative finance in the public and private sector.
Baeho Kim, CDAR Visiting Researcher, to present at the SIAM Conference on Financial Mathematics & Engineering
November 17-19, 2016 in Austin, Texas (link to website)
Stochastic Intensity Margin Modeling of Credit Default Swap Portfolios
Abstract: We consider the problem of initial margin (IM) modeling for portfolios of credit default swaps (CDS) from the perspective of a derivatives Central Counterparty (CCP). The CCPs’ IM models in practice are based on theoretically-unfounded direct statistical modeling of CDS spreads. Using a reduced-form approach, our IM model based on stochastic default intensity prices the portfolio constituents in a theoretically meaningful way and shows that statistical IM models can underestimate CCPs’ collateral requirements. In addition, our proposed Affine jump-diffusion intensity modeling approach illustrates that a counter-cyclical IM scheme can be implemented from a macro-prudential perspective.