Fall 2022

SEM217: Alex Lipton, Abu Dhabi Investment Authority: Forex Trading Utilizing Blockchains

Tuesday, September 20th @ 11:00-12:30 PM (ONLINE)

We argue that decentralized finance (DeFi) can be used to reorganize forex trading and market-making. Specifically, we show that an automated market-making (AMM) cross-settlement mechanism for digital assets on interoperable blockchains, handling central bank digital currencies (CBDCs) and stable coins, is a promising venue. We develop an innovative approach for generating fair exchange rates for on-chain assets consistent with traditional off-chain markets. Finally, we illustrate the efficacy of our approach on realized FX rates for...

SEM217: Tizian Otto, University of Hamburg (visiting Stanford University)

Tuesday, October 18th @ 11:00-12:30 PM

This paper evaluates the predictive performance of machine learning techniques in estimating time-varying market betas of U.S. stocks. Compared to established estimators, machine learning-based approaches outperform from both a statistical and an economic perspective. They provide the lowest forecast errors and lead to truly ex-post market-neutral portfolios. Among the different techniques, random forests perform the best overall. Moreover, the inherent model complexity is strongly time-varying. Historical betas, as well as turnover and size...