About  Research  Events  People  Reports  Alumni  Contact  Home
Multivariate Risk Modeling Lecture Day "Advances in Financial Mathematics" January 19, 2011
Wednesday January 19
Abstracts Umut Can (University of Tilburg, NL) Goodness of Fit Testing with Empirical Copulas We propose a sequential scanning innovation operation to transform the empirical copula process asymptotically into a standard Wiener process. This transformation paves the way to the development of a myriad of asymptotically distributionfree goodnessoffit tests for copulabased models. Roger Laeven (University of Tilburg, NL) Entropy Coherent and Entropy Convex Measures of Risk We introduce two subclasses of convex measures of risk, referred to as entropy coherent and entropy convex measures of risk. We prove that convex, entropy convex and entropy coherent measures of risk emerge as certainty equivalents under variational, homothetic and multiple priors preferences, respectively, upon requiring the certainty equivalents to be translation invariant. In addition, we study the properties of entropy coherent and entropy convex measures of risk, derive their dual conjugate function, and prove their distribution invariant representation. Some financial applications and examples of entropy coherent and entropy convex measures of risk are also investigated. Dilip Madan Capital Minimization as a Market Objective
The static two price economy of conic finance is fi…rst employed to defi…ne capital, profi…t, and subsequently return and leverage. Examples illustrate how profi…ts are negative on claims taking exposure to loss and positive on claims taking gain exposure. It is argued that though markets do not have preferences or objectives of their own, competitive pressures lead markets to become capital minimizers or leverage maximizers. Yet within a static context one observes that hedging strategies must then depart from delta hedging and incorporate gamma adjustments. Finally these ideas are generalized to a dynamic context where for dynamic conic …finance, the bid and ask price sequences are seen as nonlinear expectation operators associated with the solution of particular backward stochastic difference equations (BSDE) solved in discrete time at particular tenors leading to tenor specifi…c or equivalently liquidity contingent pricing. The drivers of the associated BSDEs are exhibited in complete detail. Martijn Pistorius On quantification of counterparty risk
We construct a dynamical credit model that can be calibrated exactly to CDS
quotes. Modelling the default time as the firstpassage time of a credit
index process to the level zero, we show that the parameters of this credit
index process can be chosen such that the riskneutral (implied)
distribution of the time of default is matched. Wim Schoutens (KU Leuven) Measuring Market Fear  market fear ingredients:
volatility, liquidity and herd behavior Frederic Vrins (ING) Analytical Pricing of Basket Default Swaps: A dynamic model with automatic calibration to CDS curves
In this talk, we will consider the model originally proposed by Hull & White
in 2008 for the pricing of multiplename credit derivatives. In this model,
CDO tranches and related options can be priced in a semianalytical way. It
is therefore an interesting dynamic alternartive to the static Gaussian
copula model. Unfortunately, in the original setup of Hull & White, the
calibartion to the underlying CDSs cannot be achieved analytically: Monte
Carlo simulations are needed to calibrate the model with respect to each
underlying, and this is required at each step of the tranche calibration
process. This is a major limitation of the model which becomes very quickly
untractable unless some drastic assumptions (like pool homogeneity) are
made.


Last updated
21jan2011, P.O. Box 513, 5600 MB Eindhoven, The Netherlands 