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Prof. Dr. Erich Walter Farkas
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| 9.00–9.15 |
Prof. Dr. Paul Embrechts
(Department of Mathematics,
ETH Zürich):
Opening |
| 9.15–10.00 |
Prof. Dr. Semyon Malamud
(Department of Mathematics,
ETH Zürich):
Information Percolation with Equilibrium Search Dynamics Abstract: This is a joint work with Gustavo Manso (MIT) and Darrell Duffie (Stanford University). We solve for the equilibrium dynamics of information sharing in a large population. Each agent is endowed with signals regarding the likely outcome of a random variable of common concern. Individuals choose the effort with which they search for others from whom they can gather additional information. When two agents meet, they share their information. The information gathered is further shared at subsequent meetings, and so on. Equilibrium exist in which agents search maximally until they acquire sufficient information precision, and then minimally. Endowing agents with public signals can in some cases reduce welfare. |
| 10.00–10.30 | Coffee Break |
| 10.30–11.00 |
Dr. Michel Andenmatten
(Executive Director,
Risk Methodology,
UBS Investment Bank):
A Practitioner's View on Risk Methodology Abstract: An overview on the broad range of activities that form part of quantitative risk management in large financial institutions is given from a practical standpoint, with a deliberate bias towards the speaker's employer where dedicated teams focus on, amongst other things, developing methodologies required to measure market, credit and model risk. A selection of current projects is motivated and presented. |
| 11.00–11.30 |
Elise Gourier
(Deloitte Zurich and PhD student at the
Swiss Banking Institute,
University of Zurich):
On Operational Risk Quantification using Extreme Value Theory and Copulas: From Theory to Practice Abstract: In this work, jointly done with Donato Abbate (Deloitte Zurich) and Walter Farkas (University & ETH Zurich) we point out several pitfalls of the standard methodologies for quantifying operational losses. Firstly, we use Extreme Value Theory to model real heavy-tailed data. We show that using the Value-at-Risk as a risk measure may lead to a mis-estimation of the capital requirements. In particular, we examine the issues of stability and coherence and relate them to the degree of heavy-tailedness of the data. Secondly, we introduce dependence between the business lines using Copula Theory. We show that standard economic thinking about diversification may be inappropriate when infinite-mean distributions are involved. |
| 11.30–12.00 |
Dr. David Ardia
(Econometric Institute,
Erasmus University Rotterdam):
Bayesian Estimation of a Markov-Switching Threshold Asymmetric GARCH Model Abstract: A Bayesian estimation of a regime-switching threshold asymmetric GARCH model is proposed. The specification is based on a Markov-switching model with Student?s t innovations and K separate GJR(1,1) processes whose asymmetries are located at free non-positive threshold parameters. The model aims at determining whether or not: (i) structural breaks are present within the volatility dynamics; (ii) asymmetries (leverage effects) are present, and are different between regimes; (iii) the threshold parameters (locations of bad news) are similar between regimes. A novel MCMC scheme is proposed which allows for a fully automatic Bayesian estimation of the model. The presence of two distinct volatility regimes is shown in an empirical application to the Swiss Market Index log-returns. The posterior results indicate no differences with regards to the asymmetries and their thresholds when comparing highly volatile periods with the milder ones. Comparisons with a single-regime specification indicates a better in-sample fit and a better forecasting performance for the Markov-switching model. |
| 12.00–14.00 | Lunch Break |
| 14.00–14.45 | Prof. Dr. Nizar Touzi
(Centre de Mathematiques Appliquees,
Ecole Polytechnique, Paris):
Probabilistic Numerical Methods for fully nonlinear PDEs Abstract: TBA |
| 14.45–15.15 |
Dr. Patrick Schünemann
(CEO Dixendris AG, Basel):
Approach Management: a new comprehensive Sales Management Methodology incorporating risk dimensions Abstract: Nowadays, most markets -- especially in finance, insurance and consumer goods -- can be characterized as saturated commodity markets. At the same time, marketing and sales are among the last business functions to become process oriented. We therefore developed a new systematic methodology to acquire new customers bound to competitors and retain them, called Approach Management, i.e. implementing a marketing and sales "Approach". Introducing this methodology the first time at PostFinance showed dramatic results in improving sales performance. However, marketing and sales organizations primary focus is fulfilling sales quota and not managing risk. It has been shown, that indeed Approach management is a very well suited tool to implement risk management in the whole customer and market lifecycle, specifically regarding market risk, counterparty risk, credit risk and operational risk. In this talk we discuss the mechanics of Approach Management and how risk management can be integrated. |
| 15.15–15.45 | Coffee Break |
| 15.45–16.15 |
Dr. Gilles Zumbach
(Risk Metrics Group, Petit Lancy):
The RiskMetrics 2006 risk methodology and Backtesting: from 1 day to 1 year Abstract: The basic concepts used in market risk evaluations are reviewed, as well as the standard methodologies to compute quantitatively the risk. A new methodology is introduced with the goal to incorporate the state-of-the-art knowledge about financial time series, in particular fat-tails and the long memory for the volatility clustering. It is designed to be robust, to be more accurate than the existing methodologies, and to be able to reach long risk horizons, up to one year. The performance evaluation of risk methodologies is explained. To compare the performance measures of the main risk methodologies, we present a systematic backtesting study using 233 time series covering all geographic areas and asset classes, for time horizons ranging from one day to one year. |
| 16.15–16.45 |
Prof. Dr. Loriano Mancini
(Swiss Banking Institute,
University of Zurich):
Robust Value at Risk Prediction Abstract:We propose a general robust semiparametric bootstrap method to estimate conditional predictive distributions of GARCH-type models. Our approach is based on a robust estimator for the parameters in GARCH-type models and a robustified resampling method for standardized GARCH residuals, which controls the bootstrap instability due to influential observations in the tails of standardized GARCH residuals. Monte Carlo simulation shows that our method consistently provides lower VaR forecast errors, often to a large extent, and in contrast to classical methods never fails validation tests at usual significance levels. We test extensively our approach in the context of real data applications to VaR prediction for market risk, and find that only our robust procedure passes all validation tests at usual confidence levels. Moreover, the smaller tail estimation risk of robust VaR forecasts implies VaR prediction intervals that can be nearly 20% narrower and 50% less volatile over time. This is a further desirable property of our method, which allows to adapt risky positions to VaR limits more smoothly and thus more efficiently. |
| 16.45–17.15 |
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| 17.15–18.00 | Apero |
The speakers:
Conference Secretary:
Ms. Galit Shoham, HG G21.3 (IFOR), Phone 044/632 40 16, E-mail: sekretariat@ifor.math.ethz.ch