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Abstract
This paper parsimoniously generalizes the VIX variance index by constructing model-free factor portfolios that replicate skewness and higher moments. It then develops an infinite series to replicate option payoffs in terms of the stock, bond, and factor returns. The truncated series offers new formulas that generalize the Black-Scholes formula to hedge variance and skewness risk.


About the speaker
Steve Heston is Professor of Finance at the University of Maryland. He is known for his pioneering work on the pricing of options with stochastic volatility.
Steve graduated with a double major in Mathematics and Economics from the University of Maryland, College Park in 1983, an MBA in 1985 followed by a PhD in Finance in 1990. He has held previous faculty positions at Yale, Columbia, Washington University, and the University of Auckland in New Zealand and worked in the private sector with Goldman Sachs in Fixed Income Arbitrage and in Asset Management Quantitative Equities.

A wide variety of solutions have been proposed in order to cope with the deficiencies of Modern Portfolio Theory. The ideal portfolio should optimise the investor’s expected utility. Robustness can be achieved by ensuring that the optimal portfolio does not diverge too much from a predetermined allocation. Information geometry proposes interesting and relatively simple ways to model divergence. These techniques can be applied to the risk budgeting framework in order to extend risk budgeting and to unify various classical approaches in a single, parametric framework. By switching from entropy to divergence functions, the entropy-based techniques that are useful for risk budgeting can be applied to more traditional, constrained portfolio allocation. Using these divergence functions opens new opportunities for portfolio risk managers. This presentation is based on two papers published by the BNP Paribas QIS Lab, `The properties of alpha risk parity’ (2022, Entropy) and `Turning tail risks into tailwinds’ (2020, The Journal of Portfolio Management).

In 1735, Euler observed that $ζ(2) = 1 + \frac{1}{2²} + \frac{1}{3²} + ⋯ = \frac{π²}{6}$. This is related to the famous identity $ζ(−1) "=" 1 + 2 + 3 + ⋯ "=" \frac{−1}{12}$. In general, values of the Riemann zeta function at positive even integers are equal to rational numbers multiplied by a power of $π$. The values at positive odd integers are much more mysterious; for example, Apéry proved that $ζ(3) = 1 + \frac{1}{2³} + \frac{1}{3³} + ⋯$ is irrational, but we still don't know if $ζ(5) = 1 + \frac{1}{2⁵} + \frac{1}{3⁵} + ⋯$ is rational or not! In this talk, we will explain the arithmetic significance of these values, their generalizations to Dirichlet/Dedekind L−functions, and to L−functions of elliptic curves. We will also present a new formula for $ζ(3) = 1 + \frac{1}{2³} + \frac{1}{3³} + ...$ in terms of higher algebraic cycles which came out of an ongoing project with Lambert A'Campo.

Khintchine's Theorem is one of the cornerstones in metric Diophantine approximation. The question of removing the monotonicity condition on the approximation function in Khintchine's Theorem led to the recently proved Duffin-Schaeffer conjecture. Gallagher showed an analogue of Khintchine's Theorem for multiplicative Diophantine approximation, again assuming monotonicity. In this talk, I will discuss my joint work with L. Frühwirth about a Duffin-Schaeffer version for Gallagher's Theorem. Furthermore, I will give a broader overview on various questions in metric Diophantine approximation and demonstrate the deep connection to both analytic and combinatorial number theory that is hidden inside the proof of these statements.

Functoriality is a key feature in Langlands’ conjectured relationship between automorphic representations and Galois representations; it predicts that certain Galois representations are automorphic, i.e. should come from automorphic representations. We discuss the idea of $p$-adic propagation of automorphy, which seeks to establish the automorphy of everything in a “neighborhood” given the automorphy of something in that neighborhood. The “neighborhoods” that we consider will be the irreducible components of a $p$-adic analytic space called the eigenvariety, which parameterizes $p$-adic automorphic representations. This technique was introduced by Newton and Thorne in their proof of symmetric power functoriality, and can be adapted to investigate similar problems.