Events

Xiaowu Dai, UC Berkeley: Towards theoretical understanding of large batch training in stochastic gradient descent

Stochastic gradient descent (SGD) is almost ubiquitously used in training non-convex optimization tasks. Recently, a hypothesis by Keskar et al. (2017) that large batch SGD tends to converge to sharp minima has received increasing attention. We justify this hypothesis by providing new properties of SGD in both finite-time and asymptotic regimes, using tools from Partial Differential Equations. In particular, we give an explicit escaping time of SGD from a local minimum in the finite-time regime. We prove that SGD tends to converge to flatter minima in the asymptotic regime (although it may...

Tingyue Gan, UC Berkeley: Linking 10-K and the GICS - through Experiments of Text Classification and Clustering

A 10-K is an annual report filed by a publicly traded company about its financial performance and is required by the U.S. Securities and Exchange Commission (SEC). 10-Ks are fairly long and tend to be complicated. But this is one of the most comprehensive and most important documents a public company can publish on a yearly basis. The Global Industry Classification Standard (GICS) is an industry taxonomy developed in 1999 by MSCI and S&P Dow Jones Indices and is designed to classify a company according to its principal business activity. The GICS hierarchy begins with 11 sectors and is...

Senyang Zhao, SWUFE: The Implication of Information Network in Market Quality and Market Reaction to Public Announcements

This research studies the role of information network in market quality and market reaction to public announcements. We propose in this article a three-period rational noisy expected equilibrium model by taking both public and private information into account with an embedded information network structure among market traders. Closed form expressions for market reaction and market quality are derived as a function of topological structure of the network and several novel results are revealed. The trading volume and price change have different responses to network connectedness. As network...

CANCELLED

Start date: 2019-04-23 11:00:00 End date: 2019-04-23 12:30:00 Venue: 1011 Evans Hall Address: 1011 Evans Hall, Berkeley, CA, 94720

Farzad Pourbabaee, UC Berkeley: Robust Experimentation in the Continuous Time Bandit Problem

We consider the experimentation dynamics of a decision maker (DM) in a two-armed bandit setup, where the agent holds ambiguous beliefs regarding the distribution of the return process of one arm and is certain about the other one. The DM entertains Multiplier preferences a la Hansen and Sargent [2001], thus we frame the decision making environment as a two-player differential game against nature in continuous time. We characterize the DM's value function and her optimal experimentation strategy that turns out to follow a cut-off rule with respect to her belief process. The belief threshold...

NO SEMINAR

Start date: 2019-04-09 11:00:00 End date: 2019-04-09 12:30:00 Venue: 1011 Evans Hall Address: 1011 Evans Hall, Berkeley, CA, 94720

Raymond Leung, UC Berkeley: Asset Insurance Premium in the Cross-Section of Asset Synchronicity

Any asset can use some portfolio of similar assets to insure against its own factor risks, even if the identities of the factors are unknown. A long position of an asset and a short position of this portfolio forms an asset insurance premium (AIP) that is different from the equity risk premium. We estimate the AIP by projecting a stock’s return onto the entire asset returns span using a machine learning method. Stocks least (most) synchronized with other stocks earn a monthly AIP of 0.976% (0.305%). Asset synchronicity is countercyclical: high consumption growth correlates with low average...

Robert Marquez, UC Davis: Financial Frictions, Foreign Currency Borrowing, and Systemic Risk

We present a novel explanation for the prevalence of foreign-currency borrowing in emerging markets. First, under limited liability, foreign-currency denominated debt acts as a state-contingent claim: Borrowers maximizing profits in local currency are partly shielded from large devaluations through bankruptcy, when repaying foreign currency debt is expensive, but pay higher rates in non-devaluation states, when repayment is relatively cheaper. Second, foreign- currency borrowing can improve firms’ incentives and reduce agency problems at the cost of higher systemic risk. The resulting...

Samim Ghamami, Goldman Sachs and UC Berkeley Center for Risk Management Research: Collateralized Networks

We study the spread of losses and defaults through financial networks focusing on two important elements of regulatory reforms: collateral requirements and bankruptcy stay rules in over-the-counter (OTC) markets. Under "segregated" collateral requirements, one firm can benefit from the failure of another, the failure frees the committed collateral of the surviving firm giving it additional resources to make other payments. In OTC derivatives markets, similarly, one firm may obtain additional resources upon the failure of another if it terminates its in the money derivatives with the failed...

Ola Mahmoud, University of Zurich: How elementary is diversification?

Diversification is a fundamental concept in financial economics, risk management, and decision theory. From a broad perspective, it conveys the idea of introducing variety to a set of objects. Today, there is general consensus that some form of diversification is beneficial in asset allocation, however its definition is context-dependent and there is no consensus on a widely accepted, mathematically concise and economically sound notion of diversification. Indeed, there is an ongoing debate about what the “best” level of diversification should be. There is also a recent trend of evaluating...