Volume 2016, Issue 83. Pages 1–72
Every issue we bring you original material from some of the best columnists, educators and cutting-edge researchers. In this issue:
Bibliography
- “Contents,” Wilmott, vol. 2016, iss. 83, p. 1–1, 2016.
[Bibtex]@article {WILM:WILM10499, title = {Contents}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10499}, doi = {10.1002/wilm.10499}, pages = {1--1}, year = {2016}, } - D. Tudball, “Ed’s letter: in other words,” Wilmott, vol. 2016, iss. 83, p. 2–3, 2016.
[Bibtex] [Abstract]
We look to the bookshelves for inspiration.
@article {WILM:WILM10500, author = {Tudball, Dan}, title = {Ed's Letter: In Other Words}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10500}, doi = {10.1002/wilm.10500}, pages = {2--3}, year = {2016}, abstract = {We look to the bookshelves for inspiration.}, } - “News,” Wilmott, vol. 2016, iss. 83, p. 4–9, 2016.
[Bibtex]@article {WILM:WILM10501, title = {News}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10501}, doi = {10.1002/wilm.10501}, pages = {4--9}, year = {2016}, } - UnRisk, “Unriskomegawealth,” Wilmott, vol. 2016, iss. 83, p. 10–11, 2016.
[Bibtex] [Abstract]
In the age of strong regulatory requirements – such as MIFID-II or its Swiss counterpart, FinSA – is it still possible to serve clients with an engaging, customer-centered financial advisory process?
@article {WILM:WILM10502, author = {UnRisk}, title = {UnRiskOmegaWealth}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10502}, doi = {10.1002/wilm.10502}, pages = {10--11}, year = {2016}, abstract = {In the age of strong regulatory requirements – such as MIFID-II or its Swiss counterpart, FinSA – is it still possible to serve clients with an engaging, customer-centered financial advisory process?}, } - A. Brown, “Inconceivable!,” Wilmott, vol. 2016, iss. 83, p. 12–15, 2016.
[Bibtex] [Abstract]
There are two ways to compute microscopic probabilities that are contradicted both by simple mathematics and actual data: one foolish and one too clever.
@article {WILM:WILM10503, author = {Brown, Aaron}, title = {Inconceivable!}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10503}, doi = {10.1002/wilm.10503}, pages = {12--15}, year = {2016}, abstract = {There are two ways to compute microscopic probabilities that are contradicted both by simple mathematics and actual data: one foolish and one too clever.}, } - R. Bogni, “Death, priorities, and economics,” Wilmott, vol. 2016, iss. 83, p. 16–17, 2016.
[Bibtex] [Abstract]
What is the human project, what optionality does it require, and how can we fund it?
@article {WILM:WILM10504, author = {Bogni, Rudi}, title = {Death, Priorities, and Economics}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10504}, doi = {10.1002/wilm.10504}, pages = {16--17}, year = {2016}, abstract = {What is the human project, what optionality does it require, and how can we fund it?}, } - B. Ziemba, “The 2015–2016 nfl season, playoffs, and the super bowl,” Wilmott, vol. 2016, iss. 83, p. 18–25, 2016.
[Bibtex] [Abstract]
The annual football fest arrives.
@article {WILM:WILM10505, author = {Ziemba, Bill}, title = {The 2015–2016 NFL Season, Playoffs, and the Super Bowl}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10505}, doi = {10.1002/wilm.10505}, pages = {18--25}, year = {2016}, abstract = {The annual football fest arrives.}, } - D. Tudball, “The medium of contingency,” Wilmott, vol. 2016, iss. 83, p. 26–37, 2016.
[Bibtex] [Abstract]
Dan Tudball discusses the consequences of inverting our thinking about the market with Elie Ayache.
@article {WILM:WILM10506, author = {Tudball, Dan}, title = {The Medium of Contingency}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10506}, doi = {10.1002/wilm.10506}, pages = {26--37}, year = {2016}, abstract = {Dan Tudball discusses the consequences of inverting our thinking about the market with Elie Ayache.}, } - D. Tudball, “A banquet of consequences,” Wilmott, vol. 2016, iss. 83, p. 38–41, 2016.
[Bibtex] [Abstract]
Dan Tudball talks to the writer who now discerns that we may already have consumed our own future…
@article {WILM:WILM10507, author = {Tudball, Dan}, title = {A Banquet of Consequences}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10507}, doi = {10.1002/wilm.10507}, pages = {38--41}, year = {2016}, abstract = {Dan Tudball talks to the writer who now discerns that we may already have consumed our own future…}, } - D. Aldous, “Financial risk management… for dummies,” Wilmott, vol. 2016, iss. 83, p. 42–45, 2016.
[Bibtex] [Abstract]
Respected probabilist David Aldous reviews Aaron Brown’s demystification of risk management.
@article {WILM:WILM10508, author = {Aldous, David}, title = {Financial Risk Management… for Dummies}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10508}, doi = {10.1002/wilm.10508}, pages = {42--45}, year = {2016}, abstract = {Respected probabilist David Aldous reviews Aaron Brown's demystification of risk management.}, } - D. Ardia, A. Guerrouaz, and L. F. Hoogerheide, “A note on jointly backtesting models for multiple assets and horizons,” Wilmott, vol. 2016, iss. 83, p. 46–49, 2016.
[Bibtex] [Abstract]
We propose a simulation-based methodology, which allows us to test the performance of multi-level and/or multi-horizon value-at-risk forecasts.
@article {WILM:WILM10509, author = {Ardia, David and Guerrouaz, Anas and Hoogerheide, Lennart F.}, title = {A Note on Jointly Backtesting Models for Multiple Assets and Horizons}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10509}, doi = {10.1002/wilm.10509}, pages = {46--49}, keywords = {bootstrap test, GARCH, dependent time series, multiple testing, value-at-risk}, year = {2016}, abstract = {We propose a simulation-based methodology, which allows us to test the performance of multi-level and/or multi-horizon value-at-risk forecasts.}, } - C. Li and L. Wu, “Fva and cva for collateralized trades with re-hypothecation,” Wilmott, vol. 2016, iss. 83, p. 50–59, 2016.
[Bibtex] [Abstract]
Through this article we join the ongoing “FVA debate” with a strategy of bilateral replication, which enables us to price derivatives trades and identify XVAs, including the FVA. We let the issuer and buyer replicate the derivative’s payoffs and the loss given the issuer’s default, respectively, while taking into account the costs of funding for replication and collateral posting in the replicating portfolios. The strategy leads to a PDE for the economic value of the derivative, and the PDE also implies the unique risk-neutral pricing measure. A proper solution of the PDE gives rise to a decomposition of the derivatives economic value into the risk-free value of the derivative, the credit valuation adjustment, and the funding valuation adjustment. We show that in general the economic values to the two trading parties are different, due to the different funding needs and funding costs, and both parties may have to bear some funding costs in order to strike a deal. When the premium for buying a derivatives asset is also funded, then to the buyer the trade actually consists of two transactions: borrowing and purchasing, and the FVA for the trade can be obtained by separately evaluating the FVAs of the two transactions.
@article {WILM:WILM10510, author = {Li, Chunhong and Wu, Lixin}, title = {FVA and CVA for Collateralized Trades with Re-hypothecation}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10510}, doi = {10.1002/wilm.10510}, pages = {50--59}, keywords = {Counterparty default risk, funding risks and funding costs, bilateral replication, partial differential equation (PDE), credit valuation adjustment (CVA), funding valuation adjustment (FVA)}, year = {2016}, abstract = {Through this article we join the ongoing “FVA debate” with a strategy of bilateral replication, which enables us to price derivatives trades and identify XVAs, including the FVA. We let the issuer and buyer replicate the derivative's payoffs and the loss given the issuer's default, respectively, while taking into account the costs of funding for replication and collateral posting in the replicating portfolios. The strategy leads to a PDE for the economic value of the derivative, and the PDE also implies the unique risk-neutral pricing measure. A proper solution of the PDE gives rise to a decomposition of the derivatives economic value into the risk-free value of the derivative, the credit valuation adjustment, and the funding valuation adjustment. We show that in general the economic values to the two trading parties are different, due to the different funding needs and funding costs, and both parties may have to bear some funding costs in order to strike a deal. When the premium for buying a derivatives asset is also funded, then to the buyer the trade actually consists of two transactions: borrowing and purchasing, and the FVA for the trade can be obtained by separately evaluating the FVAs of the two transactions.}, } - J. H. Witte, “Volatility harvesting: extracting return from randomness,” Wilmott, vol. 2016, iss. 83, p. 60–67, 2016.
[Bibtex] [Abstract]
Studying binomial and Gaussian return dynamics in discrete time, we show how excess volatility can be traded to create growth. We test our results on real-world data to confirm the observed model phenomena while also highlighting the implicit risks.
@article {WILM:WILM10511, author = {Witte, J. H.}, title = {Volatility Harvesting: Extracting Return from Randomness}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10511}, doi = {10.1002/wilm.10511}, pages = {60--67}, keywords = {volatility pumping, volatility harvesting, Parrondo's paradox, rebalancing bonus, Shannon's Demon}, year = {2016}, abstract = {Studying binomial and Gaussian return dynamics in discrete time, we show how excess volatility can be traded to create growth. We test our results on real-world data to confirm the observed model phenomena while also highlighting the implicit risks.}, } - S. Das, “The power of money,” Wilmott, vol. 2016, iss. 83, p. 68–69, 2016.
[Bibtex] [Abstract]
A trilogy of books for the layman that provides the more experiences with interesting detail, unexpected affinities, or sometime novel insights.
@article {WILM:WILM10512, author = {Das, Satyajit}, title = {The Power of Money}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10512}, doi = {10.1002/wilm.10512}, pages = {68--69}, year = {2016}, abstract = {A trilogy of books for the layman that provides the more experiences with interesting detail, unexpected affinities, or sometime novel insights.}, } - M. Radley, “Cars,” Wilmott, vol. 2016, iss. 83, p. 70–71, 2016.
[Bibtex] [Abstract]
Porsche turns convention on its head and introduces turbocharging to all of its 911 Carrera models.
@article {WILM:WILM10513, author = {Radley, Milford}, title = {Cars}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10513}, doi = {10.1002/wilm.10513}, pages = {70--71}, year = {2016}, abstract = {Porsche turns convention on its head and introduces turbocharging to all of its 911 Carrera models.}, } - J. Darasz, “The skewed world of jan darasz,” Wilmott, vol. 2016, iss. 83, p. 72–72, 2016.
[Bibtex]@article {WILM:WILM10514, author = {Darasz, Jan}, title = {The skewed world of Jan Darasz}, journal = {Wilmott}, volume = {2016}, number = {83}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10514}, doi = {10.1002/wilm.10514}, pages = {72--72}, year = {2016}, }
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