SLOAN SCHOOL OF MANAGEMENT
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Jonathan Lewellen
15.414
Financial Management
Summer 2003
Assignment 3 Due Friday, Aug. 1
Read Cooper Industries, Inc. and answer the following questions.
1. Based on Nicholsons financial pe
The Delta Method
GMM Standard Errors
Regression as GMM
Correlated Observations
MLE and QMLE
Hypothesis Testing
Standard Errors and Tests
Leonid Kogan
MIT, Sloan
15.450, Fall 2010
c
Leonid Kogan ( MIT, Sloan )
Condence Intervals and Tests
15.450, Fall 201
SLOAN SCHOOL OF MANAGEMENT
MASSACHUSETTS INSTITUTE OF TECHNOLOGY
Jonathan Lewellen
15.414
Financial Management
Summer 2003
Assignment 7 Due Tuesday, Aug. 18
Read Massey-Ferguson, 1980 and answer the following questions.
1. Describe and evaluate Massey-Fer
Introduction to Computational Finance and Financial Econometrics Chapter 1 Asset Return Calculations
Eric Zivot Department of Economics, University of Washington December 31, 1998 Updated: January 7, 2002
1
The Time Value of Money
Consider an amount $V in
Section 1 - Introduction
Overview
On behalf of the 1998-99 University of Michigan Consulting Club, we would like to
welcome to the University of Michigan Business School. We are sure that if you are not
feeling overwhelmed already, you will be after flipp
Review
1
ORIE 473 Review Problems for Final 1. A par $1000 zero-coupon bond that matures in 5 years sells for $848. Assume that there is a constant continuously compounded forward rate r. (a) What is r? (b) Suppose that one year later the forward rate r h
Mathematical Preliminaries
Primbs, MS&E 345
1
Math Preliminaries:
Our first order of business is to develop mathematical
models of asset prices and random factors.
For most of this course, we will model prices as
continuous time stochastic processes and s
A First Look at the Black-Scholes
Equation
Background:
Derivative Security:
A derivative (or derivative security) is a financial
instrument whose value depends on the values of other,
more basic underlying variables. ([Hull, 1999]).
Example: European Call
The Return Form of Arbitrage
Pricing
Pricing Theory:
Linear function form
(risk neutral)
Return form
(pdes)
Optimization
Pricing Theory:
Returns and Factor Models
Return form
(pdes)
Relationships between returns of assets
Generalizes the Black-Scholes-Mer
Applications of the Return Form of
Arbitrage Pricing:
Equity Derivatives
Deriving Equations for Derivative Assets:
Three step algorithm:
(1) Derive factor models for returns of tradable assets.
(often involves Itos lemma.)
(2) Apply absence of arbitrage c
From the Return Form to the Linear Functional Form of Arbitrage
Primbs, MS&E 345
1
Pricing Theory: Return form (pdes) Linear function form (risk neutral)
Optimization
Primbs, MS&E 345
2
Pricing Theory: Return form (pdes) Linear function form (risk neutral
The Linear Functional Form of Arbitrage
Primbs, MS&E 345
1
The Big Picture The basic argument What linear functionals look like Linear Pricing Interpretation as state prices A first step toward risk neutrality Girsanov's Theorem Summary
Primbs, MS&E 345
2
MS&E 345
Advanced Topics in Financial
Advanced
Engineering
Engineering
Jim Primbs
Stanford University
Winter, 2010
Primbs, MS&E345
1
Course Facts
Room and Time: 380-380W, MW 9:00-10:15.
Office hours: 444 Terman, after class
Web page: http:/www.stanford.ed
MIT OpenCourseWare
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15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
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Strategic Hedging
MIT Sloan School of Managem
MIT OpenCourseWare
http:/ocw.mit.edu
15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
For information about citing these materials or our Terms of Use, visit: http:/ocw.mit.edu/terms.
Financial Policy
MIT Sloan School of Manageme
MIT OpenCourseWare
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15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
For information about citing these materials or our Terms of Use, visit: http:/ocw.mit.edu/terms.
Trading Operations
MIT Sloan School of Manage
MIT OpenCourseWare
http:/ocw.mit.edu
15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
For information about citing these materials or our Terms of Use, visit: http:/ocw.mit.edu/terms.
Valuation
MIT Sloan School of Management
15.
MIT OpenCourseWare
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15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
For information about citing these materials or our Terms of Use, visit: http:/ocw.mit.edu/terms.
Pricing Risk
MIT Sloan School of Management
1
Dynamic Portfolio Choice
Financial Econometrics
Review: DP and Econometrics
Leonid Kogan
MIT, Sloan
15.450, Fall 2010
c
Leonid Kogan ( MIT, Sloan )
Review: Part II
15.450, Fall 2010
1 / 22
Dynamic Portfolio Choice
Financial Econometrics
Outline
1
Dynamic
MIT OpenCourseWare
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15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
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Measuring Risk
Dynamic Models
MIT Sloan Scho
MIT OpenCourseWare
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15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
For information about citing these materials or our Terms of Use, visit: http:/ocw.mit.edu/terms.
Measuring Risk
Part A: Exposure
MIT Sloan Sc
MIT OpenCourseWare
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15.997 Practice of Finance: Advanced Corporate Risk Management
Spring 2009
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The Role of Risk Management
MIT Sloan School
Applications of the Linear Functional Form: Pricing Exotics
Primbs, MS&E 345
1
Black Scholes
Dividends Early cash flows
Digitals Exotics Asians Barrier Lookbacks American Digitals
Primbs, MS&E 345
2
The Black-Scholes formula: This time we use risk neutral
Hedging
Primbs, MS&E 345
1
Basic Idea Hedging under Ito Processes Hedging Poisson Jumps Complete vs. Incomplete markets Delta and Delta-Gamma hedges Greeks and Taylor expansions Complications with Hedging
Primbs, MS&E 345
2
Hedging Hedging is about the re
Selecting sources of finance for business
by Steve Jay
08 Sep 2003
This article considers the practical issues facing a business when selecting
appropriate sources of finance. It does not consider the theoretical aspects of such
decisions (Modigliani and
VaR
1
Need for Risk Management
Example: (from Jorion (2001), Value at Risk ) David Askin managed $600 million fund invested in collateralized mortgage obligations (CMOs) somewhat like derivatives dicult to price Askin claimed his funds were market neutral
Interest Rate Derivatives
Primbs, MS&E 345
1
Parameterizing the linear pricing functional
Single factor models, etc.
Heath-Jarrow-Morton
Primbs, MS&E 345
2
The Big Picture Derivative pricing is nothing more than fitting data points with a linear function.
Time Series Models
1
TIME SERIES MODELS Time Series time series = sequence of observations Example: daily returns on a stock multivariate time series is a sequence of vectors of observations Example returns from set of stocks. statistical models for univa
splines
1
SPLINES MODELS IN FINANCE
Introduction Regression is about modeling the conditional expectation of a response given predictor variables. conditional expectation = the regression function Nonparametric regression is used when we do not have a mod