Generalized measures of deviation are considered as substitutes for standard deviation in a framework like that of classical portfolio theory for coping with the uncertainty inherent in achieving rates of return beyond the risk-free rate. Such measures, derived for example from conditional...

The random walk hypothesis is rejected for foreign stock market prices. Variance ratio tests are performed on weekly stock prices of nine major foreign stock market indices. While longer-term returns follow random walks, short-horizon, bi-weekly returns exhibit significant positive serial...

The paper examines the risk-return tradeoff an individual or trustee who decides to liquidate a position in an asset. Converting concentrated wealth into cash is not without risk as it may not be instantaneous. Just like the selection of an optimal asset mix along the 'efficient frontier', the...

I model the optimal behavior of an individual or trustee who decides to liquidate a position in an asset. As his holdings are large, his own sales may have adverse permanent and temporary impact on the realized return. To minimize this effect, a wealthy insider may choose to liquidate slowly. At...

This chapter surveys two methods for the optimization of real-world systems that are modelled through simulation. These methods use either linear regression metamodels, or Kriging (Gaussian processes). The metamodel type guides the design of the experiment; this design fixes the input...

This tutorial reviews the design and analysis of simulation experiments. These experiments may have various goals: validation, prediction, sensitivity analysis, optimization (possibly robust), and risk or uncertainty analysis. These goals may be realized through metamodels. Two types of...

It is well-known that under some conditions, the mean-variance rule is equivalent to stochastic dominance rule. Some academics hypothesize that there could exist mean-Omega ratio rule that could be equivalent to stochastic dominance rule under certain conditions. To explore this possible, in...

Credit risk arises because of the possibility that promised cash flows on financial claims held by banks and other financial institutions (BOFIs) will not be paid in full. Virtually all BOFIs face this risk. BOFIs are operating in markets with asymmetric information wherein prospective borrowers...

We develop a multivariate Lévy model and apply the bivariate model for the pricing of quanto options that captures three characteristics observed in real-world markets for stock prices and currencies: jumps, heavy tails and skewness. The model is developed by using a bottom-up approach from a...