1,455 research outputs found
Jump-Diffusion Risk-Sensitive Asset Management I: Diffusion Factor Model
This paper considers a portfolio optimization problem in which asset prices
are represented by SDEs driven by Brownian motion and a Poisson random measure,
with drifts that are functions of an auxiliary diffusion factor process. The
criterion, following earlier work by Bielecki, Pliska, Nagai and others, is
risk-sensitive optimization (equivalent to maximizing the expected growth rate
subject to a constraint on variance.) By using a change of measure technique
introduced by Kuroda and Nagai we show that the problem reduces to solving a
certain stochastic control problem in the factor process, which has no jumps.
The main result of the paper is to show that the risk-sensitive jump diffusion
problem can be fully characterized in terms of a parabolic
Hamilton-Jacobi-Bellman PDE rather than a PIDE, and that this PDE admits a
classical C^{1,2} solution.Comment: 33 page
Risk-sensitive investment in a finite-factor model
A new jump diffusion regime-switching model is introduced, which allows for
linking jumps in asset prices with regime changes. We prove the existence and
uniqueness of the solution to the risk-sensitive asset management criterion
maximisation problem in this setting. We provide an ODE for the optimal value
function, which may be efficiently solved numerically. Relevant probability
measure changes are discussed in the appendix. The approach of Klebaner and
Lipster (2014) is used to prove the martingale property of the relevant density
processes.Comment: 23 pages, 1 figur
Presence of multiple bacterial markers in clinical samples might be useful for presumptive diagnosis of infection in cirrhotic patients with culture-negative reports
Bacterial infections in cirrhotic patients with ascites are associated with a severe prognosis and an increased risk of death. The microbiological standard tests for the diagnosis of suspected infection, based on culture test of blood and ascitic fluid, are, in many cases (30-40 %), negative, even when patients show symptoms of infection. A multiple culture-independent protocol was applied and evaluated as a diagnostic and prognostic tool for the detection of bacterial infection in cirrhotic patients. Sixty-four culture-negative samples obtained from 34 cirrhotic patients, with PMN < 250 cells/μl of ascitic fluid, were screened for the presence of bacterial DNA, endotoxin, peptidoglycan/β-glucan and microscopically visible bacterial cells. Correlations between the presence of multiple markers and various clinical and laboratory parameters were evaluated. Bacterial DNA was detected in 23 samples collected from 16 patients; a large part of these samples also showed the presence of other bacterial markers, which was associated with a worsening of liver functionality, a higher incidence of infections during the follow-up and a higher mortality rate in our cohort of cirrhotic patients. We believe that the detection of additional bacterial markers in bacterial DNA-positive clinical samples makes the bacterial presence and its clinical significance more realistic and might be useful as early markers of an ongoing bacterial infection and in establishing a clinical prognosis
The Swiss black swan bad scenario: is Switzerland another casualty of the Eurozone crisis
Financial disasters to hedge funds, bank trading departments and individual speculative traders and investors seem to always occur because of non-diversification in all possible scenarios, being overbet and being hit by a bad scenario. Black swans are the worst type of bad scenario: unexpected and extreme. The Swiss National Bank decision on January 15, 2015 to abandon the 1.20 peg against the euro was a tremendous blow for many Swiss exporters, but also Swiss and international investors, hedge funds, global macro funds, banks as well as the Swiss central bank. In this paper we discuss the causes for this action, the money losers and the few winners, what it means for Switzerland, Europe and the rest of the world, what kinds of trades lost and how they have been prevented
Jump-diffusion asset-liability management via risk-sensitive control
In this paper, we use risk-sensitive control methods to solve a jump-diffusion asset–liability management (ALM) problem. We show that the ALM problem admits a unique classical ( C1,2C1,2 ) solution under two different sets of assumptions
How to lose money in derivatives: examples from hedge funds and bank trading departments
What makes futures hedge funds fail? The common ingredient is over betting and not being diversified in some bad scenarios that can lead to disaster. Once troubles arise, it is difficult to take the necessary actions that eliminate the problem. Moreover, many hedge fund operators tend not to make decisions to minimize losses but rather tend to bet more doubling up hoping to exit the problem with a profit. Incentives, including large fees on gains and minimal penalties for losses, push managers into such risky and reckless behavior. We discuss some specific ways losses occur. To illustrate, we discuss the specific cases of Long Term Capital Management, Niederhoffer’s hedge fund, Amaranth and Société Genéralé. In some cases, the failures lead to contagion in other hedge funds and financial institutions. We also list other hedge fund and bank trading failures with brief comments on them
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