COMMERCIAL AND INDUSTRIAL MATHEMATICS

April 19, 2014

Seminar Series on Quantitative Finance - February 25, 2004

Abstracts

Philip Protter, ORIE, Cornell University
Liquidity Risk and Arbitrage Pricing Theory
Classical theories of financial markets assume an infinitely liquid market and that all traders act as price takers. This theory is a good approximation for highly liquid stocks, although even there it does not apply well for large traders or for modelling transaction costs. We extend the classical approach by formulating a new model that takes into account illiquidities. Our approach hypothesizes a stochastic supply curve for a security's price as a function of trade size. This leads to a new definition of a self-financing trading strategy, additional restrictions on hedging strategies, and some interesting mathematical issues. The talk will be based on joint work with Umut Cetin and Robert Jarrow.

The paper itself can be found at the URL: http://www.orie.cornell.edu/~protter/finance.html
It is paper number 4.

John Hull, Rotman School of Management, University of Toronto
Valuation of a CDO and an nth to Default CDS Without Monte Carlo Simulation
In this paper we develop a fast procedure for valuing collateralized debt obligations and nth to default swaps. The procedure is based on a factor copula default correlation model. We show how many different copula models can be generated by using different distributional assumptions within the factor model. We examine the impact on valuations of default probabilities, correlations, and the copula model chosen.

back to top

Back to Quantitative Finance Seminar main page