Vanini, Paolo (2012): Fiancial Innovation, Structuring and Risk Transfer.
Download (6MB) | Preview
These lecture notes are about financial innovations. We ask why are there some innovation and how is an innovative idea realized. This forces us to consider practical and structural aspects (regulations, taxation, markets) as key drivers of innovations and also basic formal aspects in valuation.
Overview: Taxes and Regulation, Technology, Who Innovates, Life Cycle, Pricing and Hedging Discount Factors and No Arbitrage
Investment: Rule Bases, Alpha, Beta, View and Trade, Fund Industry, Portfolio Theory
Swaps and Financial Markets: IRS, TRS, ALM, ISDA Retail Structured Products Real Estate Asset Class, Green Banking, Demographic Risk
Financial Crisis: Overview Leverage, Systemic Risk, Securitization, Pricing
|Item Type:||MPRA Paper|
|Original Title:||Fiancial Innovation, Structuring and Risk Transfer|
|English Title:||Financial Innovation, Structuring and Risk Transfer|
|Keywords:||financial innovation, risk transfer, structuring, pricing, regulation, investment, markets|
|Subjects:||D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D50 - General
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
G - Financial Economics > G1 - General Financial Markets > G18 - Government Policy and Regulation
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D52 - Incomplete Markets
G - Financial Economics > G1 - General Financial Markets > G10 - General
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages
|Depositing User:||paolo vanini|
|Date Deposited:||11. Nov 2012 07:44|
|Last Modified:||17. Mar 2015 14:24|
T. Adrian and M. Brunnermeier, CoVaR, Princeton Working Paper, 2011.
T. Adrian and H. S. Shin. The Changing Nature of Financial Intermediation and the Financial Crisis of 2007-2009. Annual Review of Economics, 2(1):603–618, 2010.
T. Adrian and H. S. Shin. Liquidity and Leverage, Journal of Financial Intermediation, 19 (3), 418-437, 2010.
V. Agarwal, N. D. Daniel, and N. Y. Naik, Do Hedge Funds Manage Their Reported
F. Allen and D. Gale. Financial Contagion. Journal of Political Economy, 108(1):1–33,
F. Allen and A. Babus. Networks in Finance. In P. Kleindorfer and J. Wind, editors, The Network Challenge, pages 367–382. Wharton,
F. Allen and D. Gale, Optimal Security Design„ Review of Financial Studies 3(3), 229-263, 1988.
F. Allen and D. Gale, Financial Innovation and Risk
F. Allen, J. Barth and G. Yago, Fixing the Housing Market: Financial Innovations for the Future, Wharton School Publishing-Milken Institute Series on Financial Innovations, Upper Saddle River, NJ: Pearson Education, 2012.
F. Allen and G. Yago, Financing the Futures. Market-Based Innovations for Growth. Wharton School of Publishing and Milken Institute, 2010.
W. Allen and G. Wood, Defining and Achieving Financial Stability, Journal of Financial Stability, vol 2, issue 2,152–72, 2006.
H. Amini, R. Cont, and A. Minca. Resilience to Contagion in Financial Networks. SSRN eLibrary, 2010.
H. Amini, R. Cont, and A. Minca. Stress Testing the Resilience of Financial Networks. To appear in the International Journal of Theoretical and Applied Finance, 2011.
E. Anderson, The Dynamics of Risk-Sensitive Allocations, Journal of Economic Theory 125 (2), 93-150, 2005.
M. Arnsdorf, Central Counterparty Risk, Quantitative Research, JP Morgan, arXiv:1205.1533v1, 2012.
P. Artzner, F. Delbaen, J.-M. Eber, and D. Heath, Coherent Measures of Risk, Mathematical Finance 9 (3): 203–228, 1999.
V. Bala and S. Goyal. A non-Cooperative Model of Network Formation. Econometrica, 68:1181–1229, 2000.
M.W. Baxter and A.J.O. Rennie, Financial Calculus, An Introduction to Derivative Pricing, Cambridge University Press, 2003.
I. Ben-David, F. Franzoni, A. Landier and R. Moussawi, 2012, Do Hedge Funds Manipulate Stock Prices, Fisher College of Business Working Paper Series.
S. Balder, M. Brandl and A. Mahayni, Effectiveness of CPPI Strategie under Discrete-Time Trading, Journal of Economic Dynamics and Control Volume 33, Issue 1, January 2009, Pages 204-220.
Bank of England, Financial Stability Report, June, 2009.
G. Beneplanc and J.-C. Rochet, Risk Management in Turbulent Times, Paul Woolley Research Initiative on Markets Disfunctionality at IDEI, Toulouse, 2010.
K. Binmore, Rational Decisions, Princeton, NJ: Princeton University Press, 2009.
F. Black, and M. Scholes, From Theory to a new Financial Product, Journal of Finance 29(2), 399-412, 1874.
T. Björk, Arbitrage theory in continuous time, Oxford University Press, 2009.
BlackRock, ETF landscape: Global Handbook Q1, 2011.
G.F. Blundell and C. W. R. Ward, Property Portfolio Allocation: A Multi-Factor Model, Journal of Property Research 4 (2): 145–156, 1987.
V. Bogan, Stock Market Participation and the Internet, Journal of Financial and Quantita- tive Analysis, Vol. 43, No. 01, pp. 191–211, 2008.
C. Borio and M Drehman, Assessing the Risk of Banking Crises – Revisited , BIS Quarterly Review, March, 29-46, 2009.
M. Boss, H. Elsinger, A. Lehar an M. Summer, The Network Topology of the Interbank Market, Quantitative Finance, 4, 677-684, 2004.
D. van Bragt, M. Francke, B. Kramer and A. Pelsser, Risk-Neutral Valuation of Real Estate Derivatives, OFRC working paper series, Discussion Paper 10/2009 - 048, October, 2009
M. Brenner and Y. Izhakian, Asset Prices and Ambiguity: Empirical Evidance, Stern School of Business, Finance Working Paper Series, FIN-11-10, 2011.
D. Brigo, A. Pallavicini and R. Torrosetti, Credit Models and the Crisis, or: How I learned to stop worrying and love the CDOs, arXiv, 17 Feb 2010.
D. Brigo and F. Mercurio, Interest-Rate Models - Theory and Practice. Springer Verlag, 2001.
D. Brigo, A. Capponi, A. Pallavicini and V. Papatheodorou, Collateral Margining in Arbitrage-Free Counterparty Valuation Adjustment including Re-Hypotecation and Netting, Working Paper, King’s College, London, 2011.
R. Brian, F. Nielsen and D. Steffek, Portfolio of Risk Premia: A New Approach to Diversification, MSCI Barra Research Insights, 2009.
J. Brogaard, High Frequency Trading and its Impact on Market quality, Northwestern University Kellogg School of Management Working Paper, September, 2010.
M. Brunnermeier and S. Nagel, Hedge Funds and the Technology Bubble, Journal of Finance 59(5), 2013-2040, 2004.
Cao, H. H., T. Wang, and H. H. Zhang, Model Uncertainty, Limited Market Participation, and Asset Prices, The Review of Financial Studies, Vol. 18, No. 4, pp. 1219–1251, 2005.
P. Carr and L. Wu, Variance Risk Premiums, Review of Financial Studies, Vol. 22, No. 3, pp. 1311–1341, 2009.
M. Chlistalla, High-Frequency Trading. Better Than its Reputation?, Deutsche Bank Research, February, 2011.
R. Cifuentes. G. Ferrucci and H.Shin, Liquidity Risk and Contagion, Journal of the European Economic Association, 3, 556-566, 2005.
J. Cochrane, Asset Pricing, Princeton University Press, 2005.
G. Crawford and B. Sen, Derivatives for Decision Makers, John Wiley, New York, 1996
R. Cont, A. Moussa and E. Santos, Network Structure and Systemic Risk in Banking System, Preprint, 2010.
T. Coyler and M. Sebag-Montefiore, The State of European Bank Funding, Oliver Wyman, 2011.
D. DiPasquale and W. Wheaton. Urban Economics and Real Estate Markets. Englewood Cliffs, NJ: Prentice Hall, 1996.
V. De Miguel, L. Garlappi, F. Nogales and R. Uppal, A Generalized Approach to Portfolio Optimization: Improving Performance by Constraining Portfolio Norms. Management Science, 55, 798-812, 2009.
Y. Demyanyk and O. Van Hemert, Understanding the Subprime Mortgage Crisis, Review of Financial Studies, Volume 24, Issue 6, 1848-1880, 2011.
E. Derman and I. Kani. The Volatility Smile and its Implied Tree. Risk, 7:32-39, 1994. (available on-line)
E. Derman, I. Kani and N. Chriss. Implied Trinomial Trees of the Volatility Smile. Goldman Sachs Quantitative Strategies Research Notes, 1996. Risk, 7:32-39, 1996.
B. Dupire. Pricing with a Smile. Risk, 7:18-20, 1994.
J. Dow and S. R. d. C.Werlang, Uncertainty Aversion, Risk Aversion, and the Optimal Choice of Portfolio, Econometrica, Vol. 60, No. 1, pp. 197–204, 1992.
I. Drechsler, Uncertainty, Time-Varying Fear, and Asset Prices, The Journal of Finance, Forthcoming, 2012.
D. Duffie and H. Zhu, Does a Central Clearing Counterparty Reduce Counterparty Risk, The Review of Asset Pricing Studies, Volume 1, Issue 1, 74-95, 2012.
L.G. Epstein and T. Wang, Intertemporal Asset Pricing Under Knightian Uncertainty, Econometrica, Vol. 62, No. 2, pp. 283–322, 1994.
L. Eisenberg and T. H. Noe. Systemic Risk in Financial Systems. Management Science, 47(2):236–249, 2001.
R. Elul, Welfare Effectgs of Financial Innovation in Incomplete Markets Economies with Several Consumption Goods, Journal of Economic Theory 65, 43- 78, 1995.
B. Eraker, Do Stock Prices and Volatility Jump? Reconciling Evidence from Spot and Option Prices, The Journal of Finance, Vol. 59, No. 3, pp. 1367–1404, 2004.
H.-J. Jaeger, Tax Transparency as a Trend in International Taxation, Ernst&Young, Swiss Finance Institute Seminar, 2012.
P. Erdõs and A. Rényi. On random graphs. I. Publ. Math. Debrecen, 6:290–297, 1959.
F. Fabozzi, R. J. Shiller, and R. Tunaru, Hedging Real-Estate Risk, working paper 09-12, Yale International Center for Finance, 2009.
E. Fama, Efficient Capital Markets: A Review of Theory and Empirical Work, Journal of Finance 25, 383–417, 1970.
S. Feld, Why your Friends have More Friends than you do. Am. J. Sociol. 96, 1464–1477, 1991.
D. Filipovic, Term-Structure Models: A Graduate Course, Springer Finance, Berlin, 2009.
Financial Stability Board, Shadow Banking: Strengthening Oversight and Regulation, October, 2011.
F. Franzoni, Empirical Asset Pricing, Lecture Notes, Swiss Finance Institute and University of Lugano, 2008.
R. Frey and T. Schmidt, Vorlesungsskript Finanzmathematik I, University of Leipzig, 2006.
P. Gai and S. Kapadia. Contagion in Financial Networks. Proceedings of the Royal Society A, 466(2120):2401–2423, 2010.
Gai, P. and Kapadia, S. Liquidity Hoarding, Network Externalities, and Interbank Market Collapse. Proc. R. Soc. A 466, 2401–2423 (2010).
G. Galati and R. Moessner, Macroprudential Policy - a Literature Review, BIS Working Papers No 337, 2010.
J. Gatheral, The Volatility surface: a Practitioner’s Guide, John Wiley and Sons, Inc., 2006.
D. Geltner and J. Fisher, Pricing and Index Considerations in Commercial Real Estate Derivatives Journal of Portfolio Management Special Issue: Real Estate – 2007, pp. 1–21, 2007.
D. Geltner and D.G. Miller, Commercial Real Estate Analysis and Investments, South-Western University, College Publishing, 2001.
J. Geanuracos and B. Millar, The Power of Financial Innovation, Harper Business, New York, 1991.
A. Giese, On the Pricing of Auto-Callable Equity Structures in the Presence of Stochastic Volatility and Stochastic Interest Rates, MathFinance Workshop, Germany 2006.
G. Gigerenzer and G. Goldstein, Reasoning the Fast and Frugal Way: Models of Bounded Rationality, in Heuristics: The Foundations of Adaptive Behavior, eds Gigerenzer G., Hertwig R., Pachur T., editors. (New York: Oxford University Press; ), 31-57, 2011.
G. Gigerenzer and K. Volz, Coognitive Processes in Decisions Under Risk are not the Same as in Decisions Under Uncertainty, Front Neurosci., 6, 105, 2012.
W.N. Goetzmann and A. Kumar, Equity Portfolio Diversification, Review of Finance, Vol. 12, No. 3, pp. 433–463, 2008.
P.-M. Glauser, Value through Wealth Planning - Key trends in taxation of private investors, Swiss Finance Institute, 2011.
P.-M. Glauser, Taxation, Advanced Wealth Management Executive Education, Swiss Finance Institute and Carnegie Mellon, Pittsburgh, 2012.
J. Glover, Soaring Targe2t Imbalances Stoke German Risk Angst: Euro Credit, Bloomberg, April, 2012.
The Origins of Value. The Financial Innovations that Created Modern Capital Markets, W. Goetzmann and K. Rouwenhorst (eds.), Oxford University Press, 2005.
M. Gordy, A Risk-Factor Model Foundation for Ratings-Based Bank Capital Rules, Journal of Financial Intermediation 12(3), 199-232, 2003.
G. Gorton and A. Metrick, Securitized Banking and the Run on Repo, forthcoming Journal of Financial Economics, 2011.
Government Office for Science, The Future of Computer Trading in Financial Markets, Working Paper, UK Government’s Foresight Project on The Future of Computer Trading in Financial Markets, 2011.
H. Guo, Limited Stock Market Participation and Asset Prices in a Dynamic Economy, Journal of Financial and Quantitative Analysis, Vol. 39, No. 03, pp. 495–516, 2004.
A. G. Haldane. Rethinking the Financial Networks. 2009.
A. G. Haldane and R. M. May. Systemic Risk in Banking Ecosystems. Nature, 469:351–355, 2010.
L. Hansen and T. Sargent, Robust Control and Model Uncertainty. American Economic Review 91 (2),60-66, 2001. University Press, 2008.
L. Hansen and T. Sargent, Robustness, Princeton University Press, 2008.
O. Ledoit and M. Wolf, Honey, I Shrunk the Sample Covariance Matrix, Journal of multivariate analysis, 2004.
M. Leippold and P. Vanini, The Quantification of Operational Risk, Journal of Risk, Vol. 8, No. 1, Fall 2005.
M. Leippold, Resampling and Robust Portfolio Optimization, Lecture Notes University of Zurich, 2010.
Y. Leitner. Financial networks: Contagion, Commitment and Private Sector Bailouts. Journal of Finance, 60:2925–2953, 2005.
H. Shin, Risk and Liquidity in a System Context. Workshop on ’Accounting, risk management and prudential regulation’, BIS Working Papers No 212, 2006.
H. Shin, Risk and Liquidity in a System Context, Journal of Financial Intermediation, vol. 17, pp. 315– 29, 2008.
H. Stein, Counterparty Risk, CVA, and Basel III, Columbia University, Financial Engineering Practitioners Seminar, 2012.
J. Stiglitz, Freefall: America, Free Markets, and the Sinking of the World Economy. New York: Norton, 2010.
J. Syz and P. Vanini, Property Derivatives and Index-Linked Mortgages, Journal of Real Estate Finance and Economics, Vol. 36, No. 1, 2008.
J. Syz and P. Vanini, Arbitrage Free Price Bounds for Property Derivatives, Journal of Real Estate Finance and Economics, Vol. 43, No. 3, 2011.
A. Sussman, L. Tabb and R. Iati, US Equity High Frequency Trading: Strategies, Sizing and Market Structure, TABB Group, December, 2010.
N. Taleb, The Black Swan. The Impact of the Highly Improbable. New York: Random House, 2010.
C. Telmer, Valuation Theory: Single-Period State Price Model, Tepper School of Business, Carnegie Mellon University, 2007.
J. L. Treynor, Toward a Theory of Market Value of Risky Assets. Unpublished manuscript. A final version was published in 1999, in Asset Pricing and Portfolio Performance: Models, Strategy and Performance Metrics. Robert A. Korajczyk (editor) London: Risk Books, pp. 15–22, 1962.
F. Trojani and P. Vanini, A Note on Robustness in Merton’s Model of Intertemporal Consumption and Portfolio Choice, Journal of Economic Dynamics and Control, Vol. 26, No. 3, 423-435, 2002.