A New Integrated Approach to Managing Risk in Financial Markets

Funding: 2005: $92,000
2006: $87,000
2007: $86,000

Project Member(s): Platen, E., Novikov, A., Schlogl, E.

Funding or Partner Organisation: Australian Research Council (ARC Discovery Projects)

Start year: 2005

Summary: The project will develop a set of practicable, efficient and robust risk management methodologies for a new generation of financial technology, relevant for superannuation funds, banks and regulators. Recent risk management failures have highlighted the need for such an integrated and transparent approach, which nests existing models and allows a meaningful comparison according to economically well-founded performance criteria. By providing an innovative framework, which addresses a key empirical inconsistency of one of the central assumptions of modern quantitative finance, the methods developed in the project will be applicable beyond the typically short-term horizons of traditional risk management technology.

Publications:

Mahayni, A & Schlögl, E 2008, 'The Risk Management of Minimum Return Guarantees', BuR - Business Research, vol. 1, no. 1, pp. 55-76.
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Platen, E & Heath, D 2006, A Benchmark Approach to Quantitative Finance, 1st, Springer Berlin Heidelberg, Berlin, Germany.
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Fergusson, KJ & Platen, E 2006, 'On the distributional characterization of daily log-returns of a world stock index', Applied Mathematical Finance, vol. 13, no. 1, pp. 19-38.
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Le, T & Platen, E 2006, 'Approximating the Growth Optimal Portfolio with a Diversified World Stock Index', Journal of Risk Finance, vol. 7, no. 5, pp. 559-574.
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Borovkov, K & Novikov, A 2005, 'Explicit Bounds for Approximation Rates of Boundary Crossing Probabilities for the Wiener Process', Journal of Applied Probability, vol. 42, no. 1, pp. 82-92.
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Roberts, DO & Novikov, A 1970, 'Pricing European and discretely monitored exotic options under the Levy process framework', International Mathematica Symposium 2005, International Mathematic Symposium, Wolfram Research, Perth, Australia, pp. 1-11.

Keywords: Integrated risk management, Financial mathematics, Financial market modelling, Incomplete markets, Long term derivative pricing, Stochastic differential equations,

FOR Codes: Finance, Stochastic Analysis and Modelling, Risk Theory, Finance and investment services, Computer software and services not elsewhere classified, Microeconomic issues not elsewhere classified, Financial Mathematics

Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.