New Directions in Quantitative Finance Research
PhD-course (5 ECTS) by
Carol Alexander and Jacques Pézier
Lillehammer, Norway, August 20.-24. 2012
Instructors
Professor Carol Alexander Professor Carol Alexander is Chair of Risk Management at the ICMA Centre, Henley Business School at Reading and Chair of the Board of PRMIA, the Professional Risk Manager’s International Association. She holds degrees from the University of Sussex and the London School of Economics. She publishes widely on a broad range of topics, including: volatility theory; option pricing and hedging; trading volatility; hedging with futures; alternative investments; random orthogonal matrix simulation; game theory and real options. She has written and edited numerous books in mathematics and finance and published extensively in top-­‐ranked international journals. Her four-­‐volume textbook on Market Risk Analysis (Wileys, 2008) is the definitive guide to the subject.
1 Professor Jacques Pézier Professor Jacques Pézier has been with the ICMA Centre since 2002. He teaches courses in Portfolio Management, Hedging, Fixed Income and Financial Engineering for MSc students. He carries research with his PhD students in asset management, risk management and financial engineering. He is a graduate from Ecole Centrale (Paris) and holds a DEA in Mathematical Physics (Institut Poincaré, Paris) and a PhD in decision theory (Thayer School of Engineering, Dartmouth College, Hanover, USA). Organizers
This course is within "The national research school in business economics and administration" (NFB), that is a joint effort of 15 institutions in Norway to enhance the quality of the PhD education and to stimulate research. This course is jointly arranged by: •
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Norwegian University of Science and Technology (NTNU), contact person Sjur Westgaard Norwegian University of Life Sciences (UMB), contact person Ole Gjølberg Lillehammer University College, contact person Gudbrand Lien Location and arrivals
The PhD-­‐course will be held at Lillehammer University College in Lillehammer, Norway. How to get there? The easiest way to arrive Lillehammer is by plane to Oslo airport and then use the direct train connection to Lillehammer (approx. 2.5 hours). More information here. Registration
This intensive five day course is limited to around 25 participants. Deadline for registration June 25th. For registration, please send e-­‐mail to okorg.post@hil.no within deadline that include your: • Full name • University • Address • Telephone nr. • E-­‐mail address 2 Accommodation
Alternative accommodations are (collected by the organizer): • Lillehammer hostel, Norwegian kroner (NOK) 625 per night, booking before June 25th, Booking reference: PhD_Econometric_course_HIL. • Birkebeineren Hotel and Apartments, NOK 385 (Motel) / NOK 705 (Hotel) per night, booking before June 25th, Booking reference: #104067 Other accommodations (not contacted by the organizer): • Radisson Blu Lillehammer Hotell • Or, take a look here You are responsible for your own booking. If you have any questions regarding your accommodation, please contact Marianne Bakke by e-­‐mail marianne.bakke@hil.no. Course assessment
Exam
A final take away exam based on readings, lectures, and exercises will count 50% of
the grade. A specification of the tasks to perform on hand-out data will be given.
Students perform these tasks individually. The delivery date of the exam will be
announced.
Term-paper
An individual mandatory term-paper is required and counts for 50% of the grade. The
paper should have a design as an academic paper (specifications for the layout will
be given). The candidates should conduct their own study based on selected starting
references, own data and software. The candidate should also make a presentation
of the research paper. The delivery date of the term-paper will be announced.
Readings
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C. Alexander, 2008, Market Risk Analysis – 4 Volume books, Wiley.
Lecture notes and other material.
Selected academic papers (will be specified later).
At least, a good understanding of Quantitative Methods in Finance, Volume of Carol’s
Market Risk Analysis textbook series will be helpful.
3 Lecture syllabus
Each morning there will be about four hours of lectures on a different topic from the
recent research undertaken by Carol Alexander and Jacques Pezier.
Afternoon workshops on the material will be arranged.
A detail schedule will be provided at course start up. The schedule for each day's
seminar tentatively looks like:
Monday 20 August: Trading Volatility Carol Alexander
• VIX and other volatility indices
• Trading and statistical characteristics of VIX futures
• Trading and statistical characteristics of exchange-traded notes linked to VIX
futures
• The hazards of investing in volatility exchange-traded products
Tuesday 21 August: Generalized Moments Carol Alexander
• Variance swaps
• Derivation of model-free realized variance
• Numerical implementation of model-free variance-swap formula
• The aggregation property
• Modified definitions of realized variance, skewness and kurtosis
• Generalized implied moments up to fourth order
Wednesday 22 August: Advances in Portfolio Optimization Jacques Pezier
• Generalized performance metrics based on certainty equivalent and stochastic
dominance
• Comparison of constant-proportion and option-based portfolio insurance
strategies
• Asian portfolio insurance strategies
Thursday 23 August: Real Options and Decision Analysis Carol Alexander
• Limitations of standard, risk-neutral valuation methods
• A general decision-theoretic approach to real option valuation
• Examples of applications to real estate real options
Friday 24 August: New Simulation Methods for Finance Carol Alexander
• VaR and stress testing based on principal component analysis
• Random Orthogonal Matrix (ROM) simulation
• Applications of ROM simulation to VaR and stress testing
• Simulation of stock returns based on factor models and quantile regression
4 Social events
During the course some joint social events will be arranged, that will be announced
later.
Sponsors/Partners
Norwegian University of Science and Technology (NTNU) and Lillehammer
University College, together with Molde University College, are involved in a project
"ELCARBONRISK - Modeling and forecasting risk in electricity, carbon and related
energy markets (oil, gas, coal),” financed by the Research Council of Norway, Eidsiva
Energi and Tafjord Kraftproduksjon AS. This PhD-course is, also, a part or outcome
of that project.
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