Value-at-Risk in the Presence of Structural Breaks Using Unbiased Extreme Value Volatility Estimator

Journal of Quantitative Economics - We provide a framework based on the unbiased extreme value volatility estimator to predict long and short position value-at-risk (VaR). The given framework...     

Machine learning for quantitative finance: fast derivative pricing,hedging and fitting

In this paper, we show how we can deploy machine learning techniques in the context of traditional quant problems. We illustrate that for many classical problems, we can arrive at speed-ups of several orders of magnitude by deploying machine learning techniques based on Gaussian process regression. The price we have to pay for this extra speed is some loss of accuracy. However, we show that this reduced accuracy is often well within reasonable limits and hence very acceptable from a practical point of view. The concrete examples concern fitting and estimation. In the fitting context, we fit sophisticated Greek profiles and summarize implied volatility surfaces. In the estimation context, we reduce computation times for the calculation of vanilla option values under advanced models, the pricing of American options and the pricing of exotic options under models beyond the Black–Scholes setting.     

Factor Models for Option Pricing

Options on stocks are priced using information on index options and viewing stocks in a factor model as indirectly holding index risk. The method is particularly suited to developing quotations on stock options when these markets are relatively illiquid and one has a liquid index options market to judge the index risk. The pricing strategy is illustrated on IBM and Sony options viewed as holding SPX and Nikkei risk respectively.     

Integration of South Asian Economies: an exercise in frustration?

This paper examines the factors underlying the slow progress towards economic integration between the countries of the South Asian region, and discusses the worth and likelihood of an effective agreement. It is argued that substantial integration will only take place after further economic growth leads to increased complementarity in their economic structures.     

Trade liberalization and industrial growth in Pakistan: a cointegration analysis

Using the framework of an endogenous growth model, this study empirically analyses the relationship between trade policies and industrial growth in Pakistan during the period 1973–1995. The cointegration and error correction modelling approaches have been applied. The empirical results suggest that there exists a unique long-run relationship among the aggregate growth function of industrial value added and its major determinants of the real capital stock, the labour force, real exports, the import tariff collection rate and the secondary school enrolment ratio. The short-term dynamic behaviour of Pakistan's growth function of industrial value added has been investigated by estimating an error correction model in which the error correction term has been found to be correctly signed and statistically significant.     

Consumers' waiting in queues: The role of first‐order and second‐order justice

Past research on queuing has identified social justice as an important determinant of consumers' waiting experiences. In queuing settings, people's perception of social justice is affected by whether the principle of first in and first out (FIFO) has been violated. However, even when service follows the FIFO principle, waiting time may still differ from one consumer to another for various reasons. For instance, a consumer who happens to arrive in the queue after a large group of people may have to wait longer than average. In this research, it is argued that, aside from and independent of the FIFO principle, consumers also care about whether everyone spends an approximately equal amount of time waiting before availing of the product or service. When consumers perceive that they have spent more time waiting than others and when they can attribute this injustice to the service provider, they will be less satisfied with the waiting experience. It is also proposed that adherence to the FIFO principle is a more salient concern to consumers (thus termed “first‐order” justice), and equal waiting time (”second‐order” justice) matters only when first‐order justice is not an issue. Three studies support the predictions. © 2008 Wiley Periodicals, Inc.