ExperimentalFinanceLecture-1F

ExperimentalFinanceLecture-1F - Experimental Finance IEOR...

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Experimental Finance IEOR – Spring 2012 Mike Lipkin, Pankaj Mody
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Experimental Finance Mike Lipkin, Alexander Stanton Page 2 Lecture 1F The Market (Reality) What is experimental finance? A better term might be empirical finance. In this course we will not take for granted any equilibrium result from standard option theory. We will look for departures from standard no - arbitrage conditions, see how long they last, and decide whether they are tradeable.
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Experimental Finance Mike Lipkin, Alexander Stanton Page 3 Lecture 1F The Market (Reality) An aside: – We are exploring many things which are new to the traditional thinking in mathematical finance. – Often there are NO KNOWN ANSWERS. Problem Sets will often ask you to make your own choices for products to look at. – This should not disappoint you, since that means there is plenty of room for personal discovery. – That is why this is a laboratory course; it is also why my lectures will ask a lot of questions in gr een !
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Experimental Finance Mike Lipkin, Alexander Stanton Page 4 Lecture 1F The Market (Reality) Some preliminaries. Coursework consists of seven problem sets (individual work for the first PS, groups are OK afterwards; you need to gain facility with SQL and IVY and the best way is to just plow ahead) and one project (groups of three). The problem sets take variable amounts of time, either because you must think carefully about the organization of your queries and formatting, or because your (well-formulated) SQL queries will take much time. Since the time needed will be so uncertain, make sure to begin work early in the week. You can plan to do other things (even sleeping) while the longer queries are crunching. The problem sets can be turned in as soon as you wish, but no later than the scheduled date set in the course outline. The reason you might work through any of them early is because you might want to think about a project in an area discussed later in the course (such as take-overs or hard- to-borrows).
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Experimental Finance Mike Lipkin, Alexander Stanton Page 5 Lecture 1F The Market (Reality) You should be aware that the problem sets may be in reverse order of difficulty. The reason is that most of you will start the course with limited experience with both IVY and SQL and you will need to spend a good amount of time developing facility with them. The subject matter will start with routine stuff to let you explore IVY. Later we will get to interesting things but in a very superficial way. The project is intended to get you to look more deeply at an area of interest to you. Since I am an options trader and IVY is an options database, we will be restricted in what we look at. However the skills you develop will serve you well when you explore other databases with different securities information.
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Experimental Finance Mike Lipkin, Alexander Stanton Page 6 Lecture 1F The Market (Reality) The preliminary project proposal must be made, no later than, by the
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ExperimentalFinanceLecture-1F - Experimental Finance IEOR...

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