• Autumn Seminar 2016

    Autumn Seminar – September

    Sunday 11th – Wednesday 14th

    Presentations Available.  click on the presentation titles below.

    Event Venues
    Worcester College, Walton St, Oxford OX1 2HB
    The Malmaison Hotel, Oxford Castle, 3 New Road, Oxford, OX1 1AY (for sat nav use OX1 1AY)

    Worcester College is located on the Junction of Beaumont Street, Walton Street and Worcester Street, less than a ten minute walk from the centre of Oxford.

    Maps
    Map of central Oxford to help you find Worcester College and the Malmaison Hotel, Central Oxford Map
    The seminar room. The seminar will be held in the Linbury Room (bottom left hand corner of the map.)
    Worcester College Map
    The Hotel.
    Malmaison Hotel Map


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    Sunday September 11th
    18:30 Welcome Reception and Dinner at the Malmaison Hotel


    Monday September 12th, from 9:00 am


    Dan diBartolomeo – Founder and President, Northfield Information Systems
    Reconciliation of Default Risk and Spread Risk in Fixed Income

    Abstract There are two conflicting concepts of what credit risk actually is. The classic definition has to do with the likelihood that a given fixed income instrument will default (Probability of Default, PD), and the expected severity of economic loss in the event of a default (Loss Given Default, or LGD). In this view the focus is on the “tail risk” (negative skew in the return distribution) associated with a singular default event. Many fixed income market participants prefer to think of a given fixed income instrument as offering a credit related yield spread above a comparable duration riskless instrument. These investors think of credit risk as the volatility of the credit yield spread and related impact on the market value of an instrument (conditional on the duration). Even more chaste, some fixed income participants simply use at “duration time spread” (DTS) as a market implied measure of risk. If investors are not risk-neutral, the credit spread will compensate investors for their expected loss (PD*LGD), plus provide a risk premium to induce risk averse investors to hold these instruments. These concepts of credit risk are not equivalent because credit spreads can change over time both because of changes in expected loss, and separately because aggregate investor risk aversion can change, forcing a change in the risk premium (incremental yield) which fixed income borrowers must pay. In this presentation we will review the relevant approaches to credit risk, and illustrate how to reconcile the three views in order to satisfy the default risk concerns of “buy and hold” investors, while simultaneously explaining yield spread volatility for investors who are more concerned with controlling variation in period to period returns.


    Mark Kritzman – CEO of Windham Capital Management
    Advances in Factor Replication
    Abstract Factor investing has gained widespread acceptance among institutional investors. Factors such as economic variables are not directly investable. Investors, therefore, need to identify a combination of securities that tracks the movements in the economic variable. Other factors, however, are directly investable, such as securities with a certain attribute. Often times, though, investors choose to invest in a sub-set of the factor securities that are inexpensive to trade, or they choose to rebalance less frequently to reduce trading costs. In order to identify the best factor-tracking portfolio, investors must estimate covariances from historical observations whose realizations in the future are prone to several types of estimation error. Conventional approaches for mitigating estimation error in covariances, such as Bayesian shrinkage and resampling, are ineffective if the replicating portfolio weights include both long and short positions that sum to zero. We introduce a non-parametric procedure to account for estimation error, which enables us to incorporate the relative stability of covariances directly into the factor replication process. We show that, unlike Bayesian shrinkage and resampling, adjusting for the stability of covariances in this way produces replicating portfolios that are significantly more reliable than portfolios that are blind to estimation error.

    André Perold– CIO and Co-Managing Partner of HighVista Strategies, George Gund Professor of Finance and Banking, Emeritus, Harvard Business School
    Risk Stabilisation and Asset Allocation
    Abstract When asset class risks are time-varying, investors need to decide whether and how to adjust their asset allocations in response to changing estimates of risk. Traditional constant proportion policies such as 60/40 equities/bonds are unlikely to be optimal. In this session, I will examine properties of risk-conditioned strategies, including risk-stabilized portfolios that are managed to a constant conditional expected variance. I derive the portfolio Sharpe Ratio and kurtosis as a function of a) the relationship between expected return and volatility, b) the volatility of volatility, and c) the predictability of volatility. Within this framework, risk stabilized portfolios have the lowest exposure to fat tails. They have attractive Sharpe Ratios for a reasonable range of parameter values, and they have the highest Sharpe Ratio when the conditional Sharpe Ratio of the risky asset is constant.

    Chris Rogers – Professor of Statistical Science Cambridge
    Fundamental Fallacies of Finance
    Abstract Chris Rogers walks through the assumptions in structured finance and the pitfalls of not fully translating them to non quants within the firm, and regulators outside the firm.

    Micheal Steliaros & Daniel Giamouridis – Global Head of Quantitative Solutions EMEA Head of Portfolio Product Distribution Bank of America Merrill Lynch International (London)  Abstract Abstract and paper unavailable. Contact the authors.

    Cherry Muijsson – Financial Markets Advisory, BlackRock
    Risk aversion, wealth, and portfolio choice


    18:45, Reception and Dinner The formal dinner at 19:30 is in the Great Hall at Worcester College which is close to the porter’s lodge. A chance to dress up in black tie, or national dress is encouraged for those who have it. No shorts, T-shirts or trainers, please!

    We are lucky to have secured the services of Jed Pascoe a cartoonist to record your presence at the 30th anniversary dinner and Keith “the thief” Charnley to put a look of wonder and astonishment on your faces while he does so. This dinner will be unforgettable and you’ll have your cartoon to take home!
    Tuesday September 13th


    Jason MacQueen – Founder of LQG and Head of Research Northfield Information Systems.
    The Myths of Fund Management and the Dumbing Down of Quant.  Abstract Jason walks us through a personal view of quantitative active management, among points discussed: the distinction between academics and practitioners, and the reasons why quantitative risk management is essential.


    Ron Kahn – Managing Director, Global Head of Scientific Equity Research at BlackRock
    Single Period Optimization for Multi-Period Investing?  Abstract Unavailable, contact the author.


    James Sefton – Professor at Imperial College London
    Primitive and Technical Styles Abstract James returns to the December topic of Style timing and offers his insights.  Among them: Technical styles effectively embed a fundamental style rotation strategy, Low Volatility embeds a successful style rotation strategy that tilts to quality in downturns and value in recovery periods and Price momentum does embed a style rotation strategy, but this adds little value to an earnings momentum strategy.


    Victor DeMiguel – Professor and Subject Area Chair Management Science and Operations, London Business School
    Fifty Ways to Beat the Market?
    Abstract More than 300 characteristics have been proposed to explain the cross-section of stock returns. The existing literature employs Fama-MacBeth regressions to examine which characteristics are significant when considered jointly, but this approach ignores portfolio selection features such as diversification and transaction costs. We study which characteristics are jointly significant for portfolio construction and why.


    15:45, An afternoon of Punting


    18:45, Reception and Dinner Drinks reception at 18:45 the SeaSalt / Cuttlefish restaurant followed by an informal but delicious dinner

    Wednesday September 14th


    Arta Babaee – Co-founder Financial Signal Processing Lab of Imperial College London
    Turbulence analysis using financial signal processing.  Abstract Unavailable, contact the author.

    Marielle De Jong – Head of Fixed-Income Quant Research, Amundi
    Risk Parity: Portfolio optimization in an uncertain world Abstract Marielle examines robust risk parity, by employing shrinkage driven by entropy diversification.


    Ed Fishwick – Managing Director and Global Co-Head of Risk and Quantitative Analysis at BlackRock
    Abstract: Unavailable, contact the author.

    Venue: Worcester College, Walton St, Oxford OX1 2HB