Jack L. Treynor Volume 8, Number 2, Second Quarter 2010 View PDF… Read more
Special Issues
Quantifying Systemic Risk and Reconceptualizing The Role of Finance for Economic Growth
Dale F. Gray, Andreas A. Jobst and Samuel W. Malone Contingent claims analysis (CCA) has formed part of the core of modern financial theory since the early 1970s as basis for many credit risk measurement methods. The adaptation of CCA for the measurement and analysis of systemic risk that arises due to the cross-exposures of… Read more
Warning: Physics Envy May Be Hazardous to Your Wealth!
Andrew W. Lo and Mark T. Mueller The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems and financial markets in particular that are as predictive as those in physics. While this perspective has led to a… Read more
The Study of Crises
James H. Scott A study of financial crises can improve our understanding of theories, and of the relative strengths and weaknesses of different institutional arrangements. This article discusses four examples. (1) During the crisis, risk converged towards a global risk factor that dominated secondary risk factors. (2) Value is a secondary risk factor because it… Read more
The Future of Finance
Mark Kritzman The future of finance is bright, if for no other reason, because our financial system failed. This failure raises the level of urgency for developing more realistic models, more effective regulation, and more responsible financial institutions, and it permits us to start with a clean slate… Read more
INSIGHTS: The Inevitable Baggage We Display
Dean LeBaron Until the point at which investment models began melting, too many investment practitioners operated within a myopic belief system that failed to contemplate certain fundamentals that are rigorously observed in other scientific disciplines. Flaws crept into our research under various headings of convenient simplification, behavioral finance, and statistical tools. Biases influenced our work… Read more
BOOK REVIEWS: Guide to Investment Strategy: How To Understand Markets, Risk and Behaviour
Volume 8, Number 1, First Quarter 2010 Guide to Investment Strategy: How To Understand Markets, Risk and Behaviour Peter Stanyer Reviewed by Elroy Dimson View PDF… Read more
CASE STUDIES: Global Investing
Jack L. Treynor Volume 8, Number 1, First Quarter 2010 View PDF… Read more
Non-Normality Facts and Fallacies
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
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