David N. Esch Volume 8, Number 1, First Quarter 2010 Recently there has been an increasing trend in the quantitative finance community to call for statistical models which are explicitly model returns with non-normal probability distributions (e.g. Sheikh and Qiao, 2009, Bhansali, 2008, Harvey and Siddique, 2004). In this paper, we explain why summary rejection… Read more
Special Issues
New Directions in Financial Sector and Sovereign Risk Management
Dale Gray and Andreas A. Jobst Volume 8, Number 1, First Quarter 2010 The global financial crisis that began in 2007 has forced a re-examination of macroeconomics, financial economics, regulation, and risk management. Traditional macroeconomics overlooks the importance of risk which makes it ill-suited to analyze risk transmission, contagion and how risks can build up… Read more
Do Endowment Funds Select the Optimal Mix of Active and Passive Risks?
Keith C. Brown and Cristian Tiu Volume 8, Number 1, First Quarter 2010 The investment decision confronting managers of multi-asset class portfolios can be characterized in terms of the passive (i.e., benchmark or policy) and active (i.e., market timing and security selection) strategies they adopt. In this paper, we investigate whether managers select the appropriate… Read more
The Long View of Financial Risk
Lisa R. Goldberg and Michael Y. Hayes Volume 8, Number 1, First Quarter 2010 We discuss a practical and effective extension of portfolio risk management and construction best practices to account for extreme events. The central element of the extension is (expected) shortfall, which is the expected loss given that a value-at-risk limit is breached… Read more
INSIGHTS: Lessons on Investment Management From the Global Recession and Bear Market
Frank J. Jones Volume 8, Number 1, First Quarter 2010 The current global recession and financial crisis have significantly affected virtually all investment managers. The severity of the effects on investment management risk has induced many investment managers to reconsider their investment approaches in terms of investment management risk. This paper summarizes and evaluates many… Read more
BOOK REVIEW: The Ascent of Money: A Financial History of the World
Volume 7, Number 4, Fourth Quarter 2009 The Ascent of Money: A Financial History of the World Niall Ferguson Reviewed by Bruce Grantier View PDF… Read more
SURVEYS AND CROSSOVERS: Financial Applications with Parallel R
Sanjiv R. Das and Brian Granger Volume 7, Number 4, Fourth Quarter 2009 The use of statistical packages in finance has two functions. One, econometric analysis of large volumes of data, and two, programming financial models. A popular package for these purposes is R. In this article we will examine two canonical applications of parallel… Read more
CASE STUDIES
Volume 7, Number 4, Fourth Quarter 2009 Jack L. Treynor View PDF… Read more
Striking Regulatory Irons While Hot
Hersh Shefrin and Meir Statman Volume 7, Number 4, Fourth Quarter 2009 We are in the midst of what might end up as the most significant change to financial regulations since the Great Depression. This is because the financial and economic crisis that continues to engulf us is the most severe crisis since the Great… Read more
The Dynamics of Leveraged and Inverse Exchange-Traded Funds
Minder Cheng and Ananth Madhavan Volume 7, Number 4, Fourth Quarter 2009 Leveraged and inverse Exchange-Traded Funds (ETFs) have attracted significant assets lately. Unlike traditional ETFs, these funds have leverage explicitly embedded as part of their product design. While these funds are primarily used by short-term traders, they are gaining popularity with individual investors placing… Read more