Past Mathematical Finance Internal Seminar

27 May 2016
13:00
to
14:30
Justin Sirignano, postdoc at Imperial College.
Abstract
Deep learning has emerged as one of the forefront areas in machine learning, achieving major success in imaging, speech recognition, and natural language processing. We apply deep learning to two areas in finance: (1) mortgage delinquency and prepayment and (2) limit order books. Using datasets unprecedented in size, we show that deep neural networks outperform several status quo approaches. Due to the heavy computational cost from both the size of the models and the data, we use GPU clusters to train the models.
  • Mathematical Finance Internal Seminar
20 May 2016
13:00
to
14:30
Our Phd Students Wei Fang and Alexander Vervuurt
Abstract

Wei Title: Adaptive timestep Methods for non-globally Lipschitz SDEs

Wei Abstract: Explicit Euler and Milstein methods are two common ways to simulate the numerical solutions of
SDEs for its computability and implementability, but they require global Lipschitz continuity on both
drift and diffusion coefficients. By assuming the boundedness of the p-th moments of exact solution
and numerical solution, strong convergence of the Euler-type schemes for locally Lipschitz drift has been
proved in [HMS02], including the implicit Euler method and the semi-implicit Euler method. However,
except for some special cases, implicit-type Euler method requires additional computational cost, which
is very inefficient in practice. Explicit Euler method then is shown to be divergent in [HJK11] for non-
Lipschitz drift. Explicit tamed Euler method proposed in [HJK + 12], shows the strong convergence for the
one-sided Lipschitz condition with at most polynomial growth and it is also extended to tamed Milstein
method in [WG13]. In this paper, we propose a new adaptive timestep Euler method, which shows the
strong convergence under locally Lipschitz drift and gains the standard convergence order under one-sided
Lipschitz condition with at most polynomial growth. Numerical experiments also demonstrate a better
performance of our scheme, especially for large initial value and high dimensions, by comparing the mean
square error with respect to the runtime. In addition, we extend this adaptive scheme to Milstein method
and get a higher order strong convergence with commutative noise.

 

Alexander Title: Functionally-generated portfolios and optimal transport

Alexander Abstract: I will showcase some ongoing research, in which I try to make links between the class of functionally-generated portfolios from Stochastic Portfolio Theory, and certain optimal transport problems.

  • Mathematical Finance Internal Seminar
6 May 2016
13:00
to
14:30
Johannes Ruf
Abstract

In the first part of the talk I will review Bob Fernholz' theory of functionally generated portfolios. In the second part I will discuss questions related to the existence of short-term arbitrage opportunities.
This is joint work with Bob Fernholz and Ioannis Karatzas

  • Mathematical Finance Internal Seminar
11 March 2016
13:00
George Deligiannidis
Abstract
We give necessary and sufficient conditions for the variance of the partial sums of stationary processes to be regularly varying in terms of the spectral measure associated with the shift operator. In the case of reversible Markov chains, or with normal transition operator we also give necessary and sufficient conditions in terms of the spectral measure of the transition operator.  
The two spectral measures are then linked through the use of harmonic measure.

This is joint work with S. Utev(University of Leicester, UK) and M. Peligrad (University of Cincinnati, USA).
  • Mathematical Finance Internal Seminar
4 March 2016
13:00
Abstract

This talk will discuss work-in-progress on the numerical approximation
of reflected diffusions arising from applications in engineering, finance
and network queueing models.  Standard numerical treatments with
uniform timesteps lead to 1/2 order strong convergence, and hence
sub-optimal behaviour when using multilevel Monte Carlo (MLMC).

In simple applications, the MLMC variance can be improved by through
a reflection "trick".  In more general multi-dimensional applications with
oblique reflections an alternative method uses adaptive timesteps, with
smaller timesteps when near the boundary.  In both cases, numerical
results indicate that we obtain the optimal MLMC complexity.

This is based on joint research with Eike Muller, Rob Scheichl and Tony
Shardlow (Bath) and Kavita Ramanan (Brown).

  • Mathematical Finance Internal Seminar
26 February 2016
13:00
Abstract

When estimated volatilities are not in perfect agreement with reality, delta hedged option portfolios will incur a non-zero profit-and-loss over time. There is, however, a surprisingly simple formula for the resulting hedge error, which has been known since the late 90s. We call this The Fundamental Theorem of Derivative Trading. This is a survey with twists of that result. We prove a more general version and discuss various extensions (including jumps) and applications (including deriving the Dupire-Gyo ̈ngy-Derman-Kani formula). We also consider its practical consequences both in simulation experiments and on empirical data thus demonstrating the benefits of hedging with implied volatility.

 

  • Mathematical Finance Internal Seminar
5 February 2016
13:00
Abstract

We examine the Foreign Exchange (FX) spot price spreads with and without Last Look on the transaction. We assume that brokers are risk-neutral and they quote spreads so that losses to latency arbitrageurs (LAs) are recovered from other traders in the FX market. These losses are reduced if the broker can reject, ex-post, loss-making trades by enforcing the Last Look option which is a feature of some trading venues in FX markets. For a given rejection threshold the risk-neutral broker quotes a spread to the market so that her expected profits are zero. When there is only one venue, we find that the Last Look option reduces quoted spreads. If there are two venues we show that the market reaches an equilibrium where traders have no incentive to migrate. The equilibrium can be reached with both venues coexisting, or with only one venue surviving. Moreover, when one venue enforces Last Look and the other one does not, counterintuitively, it may be the case that the Last Look venue quotes larger spreads.


a working version of the paper may be found here

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2630662

  • Mathematical Finance Internal Seminar

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