Risk quantification of an option portfolio through the introduction of the fuzzy Black-Scholes formula

Treballs Finals del Màster de Ciències Actuarials i Financeres, Facultat d'Economia i Empresa, Universitat de Barcelona, Curs: 2018-2019, Tutor: Ana María Gil LafuenteThe aim of this thesis is to quantify the market risk of an option portfolio under uncertainty. The fuzzy sets theory is introduced to model the parameters of the Black-Scholes option-pricing formula. Since the option price is calculated through the fuzzy Black-Scholes formula, we can compute the Value-at-Risk as a fuzzy number. By doing so, we aim to capture extra information that is lost in traditional models given the uncertainty derived from the fluctuations of financial markets. Finally, we want to conclude whether the introduction of the fuzzy sets theory is useful in order to improve the risk management

Life settlement pricing with fuzzy parameters

Existing literature asserts that the growth of life settlement (LS) markets, where they exist, is hampered by limited policyholder participation and suggests that to foster this growth appropriate pricing of LS transactions is crucial. The pricing of LSs relies on quantifying two key variables: the insured's mortality multiplier and the internal rate of return (IRR). However, the available information on these parameters is often scarce and vague. To address this issue, this article proposes a novel framework that models these variables using triangular fuzzy numbers (TFNs). This modelling approach aligns with how mortality multiplier and IRR data are typically provided in insurance markets and has the advantage of offering a natural interpretation for practitioners. When both the mortality multiplier and the IRR are represented as TFNs, the resulting LS price becomes a FN that no longer retains the triangular shape. Therefore, the paper introduces three alternative triangular approximations to simplify computations and enhance interpretation of the price. Additionally, six criteria are proposed to evaluate the effectiveness of each approximation method. These criteria go beyond the typical approach of assessing the approximation quality to the FN itself. They also consider the usability and comprehensibility for financial analysts with no prior knowledge of FNs. In summary, the framework presented in this paper represents a significant advancement in LS pricing. By incorporating TFNs, offering several triangular approximations and proposing goodness criteria of them, it addresses the challenges posed by limited and vague data, while also considering the practical needs of industry practitioners

The History of the Quantitative Methods in Finance Conference Series. 1992-2007

This report charts the history of the Quantitative Methods in Finance (QMF) conference from its beginning in 1993 to the 15th conference in 2007. It lists alphabetically the 1037 speakers who presented at all 15 conferences and the titles of their papers.

Enabling service-level agreement renegotiation through extending WS-Agreement specification

WS-Agreement is a language and protocol designed for creating service-level agreements (SLAs) based on initial offers, and for monitoring those offers at runtime. The definition of WS-Agreement protocol is very general and does not contemplate the possibility of changing an agreement at runtime. This paper presents extensions of the WS-Agreement specification to support the dynamic nature of SLAs by allowing the possibility of SLA renegotiation at runtime. The extended WS-Agreement specification has been implemented and tested. Within this implementation, the concept of renegotiation is demonstrated through the ability to create more than one SLA at runtime. An evaluation is conducted to examine the profits a service provider may gain through renegotiation, as well the savings resulting from rescuing the SLA from violations as a consequence of avoiding paying penalties. The results show that making the SLA terms adaptable and changeable is a viable mechanism that provides flexibility to the service provider and service consumer

The evolution and dynamics of stocks on the Johannesburg Securities Exchange and their implications for equity investment management

[No subject] This thesis explores the dynamics of the Johannesburg Stock Exchange returns to understand how they impact stock prices. The introductory chapter renders a brief overview of financial markets in general and the Johannesburg Securities Exchange (JSE) in particular. The second chapter employs the fractal analysis technique, a method for estimating the Hurst exponent, to examine the JSE indices. The results suggest that the JSE is fractal in nature, implying a long-term predictability property. The results also indicate a logical system of variation of the Hurst exponent by firm size, market characteristics and sector grouping. The third chapter investigates the economic and political events that affect different market sectors and how they are implicated in the structural dynamics of the JSE. It provides some insights into the degree of sensitivity of different market sectors to positive and negative news. The findings demonstrate transient episodes of nonlinearity that can be attributed to economic events and the state of the market. Chapter 4 looks at the evolution of risk measurement and the distribution of returns on the JSE. There is evidence of fat tails and that the Student t-distribution is a better fit for the JSE returns than the Normal distribution. The Gaussian based Value-at-Risk model also proved to be an ineffective risk measurement tool under high market volatility. In Chapter 5 simulations are used to investigate how different agent interactions affect market dynamics. The results show that it is possible for traders to switch between trading strategies and this evolutionary switching of strategies is dependent on the state of the market. Chapter 6 shows the extent to which endogeneity affects price formation. To explore this relationship, the Poisson Hawkes model, which combines exogenous influences with self-excited dynamics, is employed. Evidence suggests that the level of endogeneity has been increasing rapidly over the past decade. This implies that there is an increasing influence of internal dynamics on price formation. The findings also demonstrate that market crashes are caused by endogenous dynamics and exogenous shocks merely act as catalysts. Chapter 7 presents the hybrid adaptive intelligent model for financial time series prediction. Given evidence of non-linearity, heterogeneous agents and the fractal nature of the JSE market, neural networks, fuzzy logic and fractal theory are combined, to obtain a hybrid adaptive intelligent model. The proposed system outperformed traditional models

Cloud Service Selection System Approach based on QoS Model: A Systematic Review

The Internet of Things (IoT) has received a lot of interest from researchers recently. IoT is seen as a component of the Internet of Things, which will include billions of intelligent, talkative "things" in the coming decades. IoT is a diverse, multi-layer, wide-area network composed of a number of network links. The detection of services and on-demand supply are difficult in such networks, which are comprised of a variety of resource-limited devices. The growth of service computing-related fields will be aided by the development of new IoT services. Therefore, Cloud service composition provides significant services by integrating the single services. Because of the fast spread of cloud services and their different Quality of Service (QoS), identifying necessary tasks and putting together a service model that includes specific performance assurances has become a major technological problem that has caused widespread concern. Various strategies are used in the composition of services i.e., Clustering, Fuzzy, Deep Learning, Particle Swarm Optimization, Cuckoo Search Algorithm and so on. Researchers have made significant efforts in this field, and computational intelligence approaches are thought to be useful in tackling such challenges. Even though, no systematic research on this topic has been done with specific attention to computational intelligence. Therefore, this publication provides a thorough overview of QoS-aware web service composition, with QoS models and approaches to finding future aspects

Novel Alert Visualization: The Development of a Visual Analytics Prototype for Mitigation of Malicious Insider Cyber Threats

Cyber insider threat is one of the most difficult risks to mitigate in organizations. However, innovative validated visualizations for cyber analysts to better decipher and react to detected anomalies has not been reported in literature or in industry. Attacks caused by malicious insiders can cause millions of dollars in losses to an organization. Though there have been advances in Intrusion Detection Systems (IDSs) over the last three decades, traditional IDSs do not specialize in anomaly identification caused by insiders. There is also a profuse amount of data being presented to cyber analysts when deciphering big data and reacting to data breach incidents using complex information systems. Information visualization is pertinent to the identification and mitigation of malicious cyber insider threats. The main goal of this study was to develop and validate, using Subject Matter Experts (SME), an executive insider threat dashboard visualization prototype. Using the developed prototype, an experimental study was conducted, which aimed to assess the perceived effectiveness in enhancing the analysts’ interface when complex data correlations are presented to mitigate malicious insiders cyber threats. Dashboard-based visualization techniques could be used to give full visibility of network progress and problems in real-time, especially within complex and stressful environments. For instance, in an Emergency Room (ER), there are four main vital signs used for urgent patient triage. Cybersecurity vital signs can give cyber analysts clear focal points during high severity issues. Pilots must expeditiously reference the Heads Up Display (HUD), which presents only key indicators to make critical decisions during unwarranted deviations or an immediate threat. Current dashboard-based visualization techniques have yet to be fully validated within the field of cybersecurity. This study developed a visualization prototype based on SME input utilizing the Delphi method. SMEs validated the perceived effectiveness of several different types of the developed visualization dashboard. Quantitative analysis of SME’s perceived effectiveness via self-reported value and satisfaction data as well as qualitative analysis of feedback provided during the experiments using the prototype developed were performed. This study identified critical cyber visualization variables and identified visualization techniques. The identifications were then used to develop QUICK.v™ a prototype to be used when mitigating potentially malicious cyber insider threats. The perceived effectiveness of QUICK.v™ was then validated. Insights from this study can aid organizations in enhancing cybersecurity dashboard visualizations by depicting only critical cybersecurity vital signs