With the increased acceptance of capital market efficiency, there has been a significant increase in the money managed on an indexed basis. Several methodologies are available to replicate the target index. In this paper, we discuss the problems of (1) defining suitable performance objectives...

It is often objected that we cannot use mathematical methods in finance because (1) finance is dominated by unpredictable unique events (the black swans), (2) there are qualitative effects that cannot be quantified, and (3) the laws themselves of finance keep on changing. In this paper we...

There are many conflicting interpretations of security prices and price determination in financial markets. They range from academic theories based on efficient markets and rational expectations hypotheses, to more traditional methods of fundamental analysis, to theories of "value" and "growth"...

It is often objected that we cannot use mathematical methods in finance because (1) finance is dominated by unpredictable unique events (the black swans), (2) there are qualitative effects that cannot be quantified, and (3) the laws themselves of finance keep on changing. In this paper we...

In this paper, we analyze factor uniqueness in the S&P 500 universe. The current theory of approximate factor models applies to infinite markets. In the limit of infinite markets, factors are unique and can be represented with principal components. If this theory would apply to realistic markets...

Purpose – This paper seeks to discuss a modeling tool for explaining credit-risk contagion in credit portfolios. Design/methodology/approach – Presents a “collective risk” model that models the credit risk of a portfolio, an approach typical of insurance mathematics. Findings – ACD...

There are many conflicting interpretations of security prices and price determination in financial markets. They range from academic theories based on efficient markets and rational expectations hypotheses, to more traditional methods of fundamental analysis, to theories of "value" and "growth"...