Spring 2019

Seminars from Spring 2019

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...

Matteo Basei, UC Berkeley: The coordination of centralised and distributed generation

We analyse the interaction between centralised carbon-emissive technologies and distributed non-emissive technologies. A representative consumer can satisfy her electricity demand by investing in solar panels and by buying power from a centralised firm. We consider the point of view of the consumer, the firm and a social planner, formulating suitable McKean-Vlasov control problems with stochastic coefficients. First, we provide explicit formulas for the production strategies which minimise the costs. Then, we look for an equilibrium price. Joint work...

Saad Mouti, UC Berkeley: Sustainable Responsible Investing and the Cross-Section of Return and Risk

The identification of factors that predict the cross-section of stock returns has been a focus of asset pricing theory for decades. We address this challenging problem for both equity performance and risk, the latter through the maximum drawdown measure. We test a variety of regression-based models used in the field of supervised learning including penalized linear regression, tree-based models, and neural networks. Using empirical data in the US market from January 1980 to June 2018, we find that a number of firm characteristics succeed in explaining the cross-sectional variation of...

Rama Cont, University of Oxford: Endogenous risk, indirect contagion and systemic risk

Deleveraging by financial institutions in response to losses may lead to contagion of losses across institutions with common asset holdings. Unlike direct contagion via counterparty exposures, this channel of contagion -which we call indirect contagion- is mediated through market prices and does not require bilateral exposures or relations. We show nevertheless that indirect contagion in the financial system may be modeled as a contagion process on an auxiliary network defined in terms of 'liquidity weighted portfolio overlaps' and we study various properties of this network using data from...

Peng Ding, UC Berkeley: Instrumental variables as bias amplifiers with general outcome and confounding

Drawing causal inference with observational studies is the central pillar of many disciplines. One sufficient condition for identifying the causal effect is that the treatment-outcome relationship is unconfounded conditional on the observed covariates. It is often believed that the more covariates we condition on, the more plausible this unconfoundedness assumption is. This belief has had a huge impact on practical causal inference, suggesting that we should adjust for all pretreatment covariates. However, when there is unmeasured confounding between the treatment and outcome...

Alex Papanicolaou, Intelligent Financial Machines: Computation of Optimal Conditional Expected Drawdown Portfolios

We introduce two approaches to computing and minimizing the risk measure Conditional Expected Drawdown (CED) of Goldberg and Mahmoud (2016). One approach is based on a continuous-time formulation yielding a partial differential equation (PDE) solution to computing and minimizing CED while another is a sampling based approach utilizing a linear program (LP) for minimizing CED.

Start date: 2019-02-12 11:00:00 End date: 2019-02-12 12:30:00 Venue: 1011 Evans Hall Address: 1011 Evans Hall, Berkeley, CA, 94720

Matteo Basei, UC Berkeley: The coordination of centralised and distributed generation

January 29, 2019 @ 11:00 am - 12:30 pm

We analyse the interaction between centralised carbon-emissive technologies and distributed non-emissive technologies. A representative consumer can satisfy her electricity demand by investing in solar panels and by buying power from a centralised firm. We consider the point of view of the consumer, the firm and a social planner, formulating suitable McKean-Vlasov control problems with stochastic coefficients. First, we provide explicit formulas for the production strategies which minimise the costs. Then, we look for an...

Peng Ding, UC Berkeley: Instrumental variables as bias amplifiers with general outcome and confounding

January 22, 2019 @ 11:00 am - 12:30 pm

Drawing causal inference with observational studies is the central pillar of many disciplines. One sufficient condition for identifying the causal effect is that the treatment-outcome relationship is unconfounded conditional on the observed covariates. It is often believed that the more covariates we condition on, the more plausible this unconfoundedness assumption is. This belief has had a huge impact on practical causal inference, suggesting that we should adjust for all pretreatment covariates. However, when there is...