Volume 2015, Issue 80. 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. 2015, iss. 80, p. 1–1, 2015.
[Bibtex]@article {WILM:WILM10453, title = {Contents}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10453}, doi = {10.1002/wilm.10453}, pages = {1--1}, year = {2015}, } - D. Tudball, “Ed’s letter:nothin’ in common,” Wilmott, vol. 2015, iss. 80, p. 2–3, 2015.
[Bibtex] [Abstract]
Among the first to warn of the global financial crisis that begin with the collapse of subprime mortgages in 2007.
@article {WILM:WILM10454, author = {Tudball, Dan}, title = {Ed's Letter:Nothin' In Common}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10454}, doi = {10.1002/wilm.10454}, pages = {2--3}, year = {2015}, abstract = {Among the first to warn of the global financial crisis that begin with the collapse of subprime mortgages in 2007.}, } - “News,” Wilmott, vol. 2015, iss. 80, p. 4–11, 2015.
[Bibtex]@article {WILM:WILM10455, title = {News}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10455}, doi = {10.1002/wilm.10455}, pages = {4--11}, year = {2015}, } - A. Brown, “The new new math,” Wilmott, vol. 2015, iss. 80, p. 12–15, 2015.
[Bibtex] [Abstract]
Could math ever be taught for math’s sake alone?
@article {WILM:WILM10456, author = {Brown, Aaron}, title = {The New New Math}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10456}, doi = {10.1002/wilm.10456}, pages = {12--15}, year = {2015}, abstract = {Could math ever be taught for math's sake alone?}, } - S. Das, “A little trouble in big china,” Wilmott, vol. 2015, iss. 80, p. 16–21, 2015.
[Bibtex] [Abstract]
Elyot Chase in Noel Coward’s Private Lives could find no other descriptor of China than its size. Most things are big in China, even its stock market crashes.
@article {WILM:WILM10457, author = {Das, Satyajit}, title = {A Little Trouble in Big China}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10457}, doi = {10.1002/wilm.10457}, pages = {16--21}, year = {2015}, abstract = {Elyot Chase in Noel Coward's Private Lives could find no other descriptor of China than its size. Most things are big in China, even its stock market crashes.}, } - L. C. MacLean and W. T. Ziemba, “Primer on utility theory,” Wilmott, vol. 2015, iss. 80, p. 22–29, 2015.
[Bibtex] [Abstract]
To structure the decision process, a theory of preferences is required. The theory of preferences concerns the ability to represent structure with a real-valued function. This has been achieved by mapping it to the mathematical index call utility.
@article {WILM:WILM10458, author = {MacLean, Leonard C. and Ziemba, W. T.}, title = {Primer on Utility Theory}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10458}, doi = {10.1002/wilm.10458}, pages = {22--29}, year = {2015}, abstract = {To structure the decision process, a theory of preferences is required. The theory of preferences concerns the ability to represent structure with a real-valued function. This has been achieved by mapping it to the mathematical index call utility.}, } - G. Meissner, “It’s all about correlation,” Wilmott, vol. 2015, iss. 80, p. 30–37, 2015.
[Bibtex] [Abstract]
In a series of several, mainly educational, articles, we will discuss and demystify the various concepts and models of correlation. In this first article Gunter Meissner gives a short history of correlation, presents an overview of 15 correlation models, clarifies the term correlation, and shows the financial areas in which correlation is critical.
@article {WILM:WILM10459, author = {Meissner, Gunter}, title = {It's All About Correlation}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10459}, doi = {10.1002/wilm.10459}, pages = {30--37}, year = {2015}, abstract = {In a series of several, mainly educational, articles, we will discuss and demystify the various concepts and models of correlation. In this first article Gunter Meissner gives a short history of correlation, presents an overview of 15 correlation models, clarifies the term correlation, and shows the financial areas in which correlation is critical.}, } - M. Staunton, “Periodic decomposition redux!,” Wilmott, vol. 2015, iss. 80, p. 38–39, 2015.
[Bibtex] [Abstract]
Channeling Francis Ford Coppola with a bang!
@article {WILM:WILM10460, author = {Staunton, Mike}, title = {Periodic Decomposition Redux!}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10460}, doi = {10.1002/wilm.10460}, pages = {38--39}, year = {2015}, abstract = {Channeling Francis Ford Coppola with a bang!}, } - Z. Kakushadze, “Heterotic risk models,” Wilmott, vol. 2015, iss. 80, p. 40–55, 2015.
[Bibtex] [Abstract]
This article gives a complete algorithm and source code for constructing what we refer to as heterotic risk models (for equities), which combine: (i) granularity of an industry classification; (ii) diagonality of the principal component factor covariance matrix for any sub-cluster of stocks; and (iii) dramatic reduction of the factor covariance matrix size in the Russian-doll risk model construction. This appears to prove a powerful approach for constructing out-of-sample stable short-lookback risk models. Thus, for intraday mean-reversion alphas based on overnight returns, Sharpe ratio optimization using our heterotic risk models sizably improves the performance characteristics compared with weighted regressions based on principal components or industry classification. We also give source code for: (a) building statistical risk models; and (ii) Sharpe ratio optimization with homogeneous linear constraints and position bounds.
@article {WILM:WILM10461, author = {Kakushadze, Zura}, title = {Heterotic Risk Models}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10461}, doi = {10.1002/wilm.10461}, pages = {40--55}, keywords = {multi-factor risk model, optimization, specific risk, factor risk, industry factors, principal components}, year = {2015}, abstract = {This article gives a complete algorithm and source code for constructing what we refer to as heterotic risk models (for equities), which combine: (i) granularity of an industry classification; (ii) diagonality of the principal component factor covariance matrix for any sub-cluster of stocks; and (iii) dramatic reduction of the factor covariance matrix size in the Russian-doll risk model construction. This appears to prove a powerful approach for constructing out-of-sample stable short-lookback risk models. Thus, for intraday mean-reversion alphas based on overnight returns, Sharpe ratio optimization using our heterotic risk models sizably improves the performance characteristics compared with weighted regressions based on principal components or industry classification. We also give source code for: (a) building statistical risk models; and (ii) Sharpe ratio optimization with homogeneous linear constraints and position bounds.}, } - M. Maio and J. de Jong, “Curiosities of the monotone-preserving cubic spline,” Wilmott, vol. 2015, iss. 80, p. 56–61, 2015.
[Bibtex] [Abstract]
In this paper we describe some new features of the monotone-preserving cubic spline and the Hyman monotonicity constraint that is implemented in various spline interpolation methods to ensure monotonicity. We find that, while the Hyman constraint is in general useful to enforce monotonicity, it can safely be omitted when the monotone-preserving cubic spline is considered. We also find that, when computing sensitivities, consistency requires making some specific assumptions about how to deal with non-differentiable locations that become relevant for special values of the parameter space.
@article {WILM:WILM10462, author = {Maio, Michele and de Jong, Jorrit-Jaap}, title = {Curiosities of the Monotone-Preserving Cubic Spline}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10462}, doi = {10.1002/wilm.10462}, pages = {56--61}, keywords = {yield curve, fixed income, interpolation, Hyman, monotone-preserving cubic spline}, year = {2015}, abstract = {In this paper we describe some new features of the monotone-preserving cubic spline and the Hyman monotonicity constraint that is implemented in various spline interpolation methods to ensure monotonicity. We find that, while the Hyman constraint is in general useful to enforce monotonicity, it can safely be omitted when the monotone-preserving cubic spline is considered. We also find that, when computing sensitivities, consistency requires making some specific assumptions about how to deal with non-differentiable locations that become relevant for special values of the parameter space.}, } - S. Das, “Book reviews,” Wilmott, vol. 2015, iss. 80, p. 62–69, 2015.
[Bibtex] [Abstract]
The world of Art continues to corrupt the purity of Money…
@article {WILM:WILM10463, author = {Das, Satyajit}, title = {Book Reviews}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10463}, doi = {10.1002/wilm.10463}, pages = {62--69}, year = {2015}, abstract = {The world of Art continues to corrupt the purity of Money…}, } - M. Radley, “Cars,” Wilmott, vol. 2015, iss. 80, p. 70–71, 2015.
[Bibtex] [Abstract]
As Audi launches MkII of its head-turning R8 supercar, it’s time to find out just how afraid its competitors with a much longer sports heritage should really be.
@article {WILM:WILM10464, author = {Radley, Milford}, title = {Cars}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10464}, doi = {10.1002/wilm.10464}, pages = {70--71}, year = {2015}, abstract = {As Audi launches MkII of its head-turning R8 supercar, it's time to find out just how afraid its competitors with a much longer sports heritage should really be.}, } - J. Darasz, “The skewed world of jan darasz,” Wilmott, vol. 2015, iss. 80, p. 72–72, 2015.
[Bibtex]@article {WILM:WILM10465, author = {Darasz, Jan}, title = {The skewed world of Jan Darasz}, journal = {Wilmott}, volume = {2015}, number = {80}, publisher = {John Wiley & Sons, Ltd}, issn = {1541-8286}, url = {http://dx.doi.org/10.1002/wilm.10465}, doi = {10.1002/wilm.10465}, pages = {72--72}, year = {2015}, }
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