Events

Jacob Steinhardt, Stanford: Robust Learning: Information Theory and Algorithms

This talk will provide an overview of recent results in high-dimensional robust estimation. The key question is the following: given a dataset, some fraction of which consists of arbitrary outliers, what can be learned about the non-outlying points? This is a classical question going back at least to Tukey (1960). However, this question has recently received renewed interest for a combination of reasons. First, many of the older results do not give meaningful error bounds in high dimensions (for instance, the error often includes an implicit sqrt(d)-factor in d dimensions). Second, recent...

Saad Mouti, UC Berkeley: On Optimal Options Book Execution Strategies with Market Impact

We consider the optimal execution of a book of options when market impact is a driver of the option price. We aim at minimizing the mean-variance risk criterion for a given market impact function. First, we develop a framework to justify the choice of our market impact function. Our model is inspired from Leland’s option replication with transaction costs where the market impact is directly part of the implied volatility function. The option price is then expressed through a Black– Scholes-like PDE with a modified implied volatility directly dependent on the market impact. We set up a...

Michael Ohlrogge, Stanford University: Bankruptcy Claim Dischargeability and Public Externalities: Evidence from a Natural Experiment

In 2009, the Seventh Circuit ruled in U.S. v. Apex Oil that certain types of injunctions requiring firms to clean up previously released toxic chemicals were not dischargeable in bankruptcy. This was widely perceived to represent a split with Sixth Circuit precedent, although Supreme Court cert was denied. Numerous legal commentators wrote of the significance of this decision in strengthening incentives for firms, and their creditors, to reduce the likelihood of costly environmental damage that would no longer be dischargeable in the event of bankruptcy. I show using difference in...

Ben Gum, AXA Rosenberg: A Deep Learning Investigation of One-Month Momentum

The one-month return reversal in equity prices was first documented by Jedadeesh (1990), who found that there was a highly significant negative serial correlation in the monthly return series of stocks. This is in contrast to the positive serial correlation of the annual stock returns. Explanations for this effect differ, but the general consensus has been that the trailing one-month return includes a component of overreaction by investors. Since 1990, the one-month return reversal effect has decayed substantially, which has led others to refine it. Asness,...

Xiang Zhang, SWUFE: Proliferation of Anomalies and Zoo of Factors – What does the Hansen–Jagannathan Distance Tell Us?

Recent research finds that prominent asset pricing models have mixed success in evaluating the cross-section of anomalies, which highlights proliferation of anomalies and zoo of factors. In this paper, I investigate that how is the relative pricing performance of these models to explain anomalies, when comparing their misspecification errors– the Hansen–Jagannathan (HJ) distance measure. I find that a traded-factor model dominates others in a specific anomaly by incorporating the multiple HJ distance comparing inference. However, different from the current research of Barillas and Shanken...

Dangxing Chen, UC Berkeley: Predicting Portfolio Return Volatility at Median Horizons

Commercially available factor models provide good predictions of short-horizon (e.g. one day or one week) portfolio volatility, based on estimated portfolio factor loadings and responsive estimates of factor volatility. These predictions are of significant value to certain short-term investors, such as hedge funds. However, they provide limited guidance to long-term investors, such as Defined Benefit pension plans, individual owners of Defined Contribution pension plans, and insurance companies. Because return volatility is variable and mean-reverting, the square root rule for...

Chi Zhang, Kamyar Kaviani, Nikita Vemuri, and Simon Walter (UC Berkeley) - Putting the 'I' in IPO

As an alternative to traditional loans, young people could issue securities that pay dividends that depend on their future financial success in life. This type of a personal IPO is especially desirable for young people, who for example may need money for a college education, because it allows them to shift the risk of repayment to investors who bet on their future success, unlike in a traditional loan setting. In this seminar we will report a framework for estimating an indicative IPO price for individuals and placing the securities with investors. We will also demo an app that is designed...

Damir Filipovic, EPFL: A Term Structure Model for Dividends and Interest Rates

Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and interest rates. Prices for dividend futures, bonds, and the dividend paying stock are given in closed form. We present an efficient moment based approximation method for option pricing. In a calibration exercise we show that a parsimonious model specification has a good fit with Euribor interest rate swaps and swaptions, Euro Stoxx 50 index dividend...

Montserrat Guillen, University of Barcelona: Is motor insurance ratemaking going to change with telematics and semi-autonomous vehicles?

Many automobile insurance companies offer the possibility to monitor driving habits and distance driven by means of telematics devices installed in the vehicles. This provides a novel source of data that can be analysed to calculate personalised tariffs. For instance, drivers who accumulate a lot of miles should be charged more for their insurance coverage than those who make little use of their car. However, it can also be argued that drivers with more miles have better driving skills than those who hardly use their vehicle, meaning that the price per mile should decrease with distance...

Nick Gunther, UC Berkeley: The Financing Rate Implied by Equity Futures

This talk will explore the cost of implicit leverage associated with an S&P 500 Index futures contract and derive an implied financing rate. While this implicit financing rate was often attractive relative to market rates on explicit financings, the relationship between the implicit and explicit financing rates was volatile and varied considerably based on legal and economic regimes. Among other findings, regulatory reform in 2000 appeared to reduce significantly the spreads between this implicit financing rate and contemporaneous Eurodollar and US Treasury rates.

Start date: 2018-...