Financial markets respond to information virtually instantaneously. Each new piece of information influences the prices of assets and their correlations with each other, and as the system rapidly changes, so too do correlation forecasts. This fast-evolving environment presents econometricians with the challenge of forecasting dynamic correlations, which are essential inputs to risk measurement, portfolio allocation, derivative pricing, and many other critical financial activities. In Anticipating Correlations, Nobel Prize-winning economist Robert Engle introduces an important new method for estimating correlations for large systems of assets: Dynamic Conditional Correlation (DCC). Engle demonstrates the role of correlations in financial decision making, and addresses the economic underpinnings and theoretical properties of correlations and their relation to other measures of dependence. He compares DCC with other correlation estimators such as historical correlation, exponential smoothing, and multivariate GARCH, and he presents a range of important applications of DCC. Engle presents the asymmetric model and illustrates it using a multicountry equity and bond return model. He introduces the new FACTOR DCC model that blends factor models with the DCC to produce a model with the best features of both, and illustrates it using an array of U.S. large-cap equities. Engle shows how overinvestment in collateralized debt obligations, or CDOs, lies at the heart of the subprime mortgage crisis--and how the correlation models in this book could have foreseen the risks. A technical chapter of econometric results also is included. Based on the Econometric and Tinbergen Institutes Lectures, Anticipating Correlations puts powerful new forecasting tools into the hands of researchers, financial analysts, risk managers, derivative quants, and graduate students.

Product Description: This book presents in detail methodologies for the Bayesian estimation of sing- regime and regime-switching GARCH models. These models are widespread and essential tools in n ancial econometrics and have, until recently, mainly been estimated using the classical Maximum Likelihood technique...read more

Product Description: Designed for courses covering social, legal and/or ethical issues. This text explores social, legal, philosophical, ethical, political, constitutional and economic implications of computing from a computer scientist's point of view...read more (view table of contents, read Amazon.com's description)

Product Description: The Handbook of News Analytics in Finance is a landmark publication bringing together the latest models and applications of News Analytics for asset pricing, portfolio construction, trading and risk control.  The content of the Hand Book is organised to provide a rapid yet comprehensive understanding of this topic...read more

(view table of contents)

an excerpt from the first chapter: Something has happened to Christmas, or to our hearts; or to both. In order to be convinced of this it is only necessary to compare the present with the past. In the old days of not so long ago the festival began to excite us in November. For weeks the house rustled with charming and thrilling secrets, and with the furtive noises of paper parcels being wrapped and unwrapped; the house was a whispering gallery. The tension of expectancy increased to such a point that there was a positive danger of the cord snapping before it ought to snap. On the Eve we went to bed with no hope of settled sleep. We knew that we should be awakened and kept awake by the waits singing in the cold; and we were glad to be kept awake so. On the supreme day we came downstairs hiding delicious yawns, and cordially pretending that we had never been more fit. The day was different from other days; it had a unique romantic quality, tonic, curative of all ills. On that day even the toothache vanished, retiring far into the wilderness with the spiteful word, the venomous thought, and the unlovely gesture. We sang with gusto "Christians, awake, salute the happy morn!" We did salute the happy morn. And when all the parcels were definitely unpacked, and the secrets of all hearts disclosed, we spent the rest of the happy morn in waiting, candidly greedy, for the first of the great meals. And then we ate, and we drank, and we ate again; with no thought of nutrition, nor of reasonableness, nor of the morrow, nor of dyspepsia. We ate and drank without fear and without shame, in the sheer, abandoned ecstasy of celebration. And by means of motley paper headgear, fit only for a carnival, we disguised ourselves in the most absurd fashions, and yet did not make ourselves seriously ridiculous; for ridicule is in the vision, not in what is seen. And we danced and sang and larked, until we could no more. And finally we chanted a song of ceremony, and separated; ending the day as we had commenced it, with salvoes of good wishes. And the next morning we were indisposed and enfeebled; and we did not care; we suffered gladly; we had had our pain's worth, and more. This was the past.

Originally published in 2003, Mathematical Techniques in Finance has become a standard textbook for master's-level finance courses containing a significant quantitative element while also being suitable for finance PhD students. This fully revised second edition continues to offer a carefully crafted blend of numerical applications and theoretical grounding in economics, finance, and mathematics, and provides plenty of opportunities for students to practice applied mathematics and cutting-edge finance. Ales Cerný mixes tools from calculus, linear algebra, probability theory, numerical mathematics, and programming to analyze in an accessible way some of the most intriguing problems in financial economics. The textbook is the perfect hands-on introduction to asset pricing, optimal portfolio selection, risk measurement, and investment evaluation. The new edition includes the most recent research in the area of incomplete markets and unhedgeable risks, adds a chapter on finite difference methods, and thoroughly updates all bibliographic references. Eighty figures, over seventy examples, twenty-five simple ready-to-run computer programs, and several spreadsheets enhance the learning experience. All computer codes have been rewritten using MATLAB and online supplementary materials have been completely updated. A standard textbook for graduate finance courses Introduction to asset pricing, portfolio selection, risk measurement, and investment evaluation Detailed examples and MATLAB codes integrated throughout the text Exercises and summaries of main points conclude each chapter

A practical guide to modern financial risk management for both practitioners and academics The recent financial crisis and its impact on the broader economy underscore the importance of financial risk management in today's world. At the same time, financial products and investment strategies are becoming increasingly complex. Today, it is more important than ever that risk managers possess a sound understanding of mathematics and statistics. In a concise and easy-to-read style, each chapter of this book introduces a different topic in mathematics or statistics. As different techniques are introduced, sample problems and application sections demonstrate how these techniques can be applied to actual risk management problems. Exercises at the end of each chapter and the accompanying solutions at the end of the book allow readers to practice the techniques they are learning and monitor their progress. A companion website includes interactive Excel spreadsheet examples and templates. Covers basic statistical concepts from volatility and Bayes' Law to regression analysis and hypothesis testing Introduces risk models, including Value-at-Risk, factor analysis, Monte Carlo simulations, and stress testing Explains time series analysis, including interest rate, GARCH, and jump-diffusion models Explores bond pricing, portfolio credit risk, optimal hedging, and many other financial risk topics If you're looking for a book that will help you understand the mathematics and statistics of financial risk management, look no further.

Product Description: Modelling has permeated virtually all areas of industrial, environmental, economic, bio-medical or civil engineering: yet the use of models for decision-making raises a number of issues to which this book is dedicated: How uncertain is my model ? Is it truly valuable to support decision-making ? What kind of decision can be truly supported and how can I handle residual uncertainty ? How much refined should the mathematical description be, given the true data limitations ? Could the uncertainty be reduced through more data, increased modeling investment or computational budget ? Should it be reduced now or later ? How robust is the analysis or the computational methods involved ? Should / could those methods be more robust ? Does it make sense to handle uncertainty, risk, lack of knowledge, variability or errors altogether ? How reasonable is the choice of probabilistic modeling for rare events ? How rare are the events to be considered ? How far does it make sense to handle extreme events and elaborate confidence figures ? Can I take advantage of expert / phenomenological knowledge to tighten the probabilistic figures ? Are there connex domains that could provide models or inspiration for my problem ? Written by a leader at the crossroads of industry, academia and engineering, and based on decades of multi-disciplinary field experience, Modelling Under Risk and Uncertainty gives a self-consistent introduction to the methods involved by any type of modeling development acknowledging the inevitable uncertainty and associated risks...read more