The Kelly Capital Growth Investment Criterion

Filename: the-kelly-capital-growth-investment-criterion.pdf
ISBN: 9789814293495
Release Date: 2011
Number of pages: 853
Author: Leonard C. MacLean
Publisher: World Scientific

Download and read online The Kelly Capital Growth Investment Criterion in PDF and EPUB This volume provides the definitive treatment of fortune's formula or the Kelly capital growth criterion as it is often called. The strategy is to maximize long run wealth of the investor by maximizing the period by period expected utility of wealth with a logarithmic utility function. Mathematical theorems show that only the log utility function maximizes asymptotic long run wealth and minimizes the expected time to arbitrary large goals. In general, the strategy is risky in the short term but as the number of bets increase, the Kelly bettor's wealth tends to be much larger than those with essentially different strategies. So most of the time, the Kelly bettor will have much more wealth than these other bettors but the Kelly strategy can lead to considerable losses a small percent of the time. There are ways to reduce this risk at the cost of lower expected final wealth using fractional Kelly strategies that blend the Kelly suggested wager with cash. The various classic reprinted papers and the new ones written specifically for this volume cover various aspects of the theory and practice of dynamic investing. Good and bad properties are discussed, as are fixed-mix and volatility induced growth strategies. The relationships with utility theory and the use of these ideas by great investors are featured.


The Kelly Capital Growth Investment Criterion

Filename: the-kelly-capital-growth-investment-criterion.pdf
ISBN: 9789814465816
Release Date: 2011-02-10
Number of pages: 884
Author: Edward O Thorp
Publisher: World Scientific

Download and read online The Kelly Capital Growth Investment Criterion in PDF and EPUB This volume provides the definitive treatment of fortune's formula or the Kelly capital growth criterion as it is often called. The strategy is to maximize long run wealth of the investor by maximizing the period by period expected utility of wealth with a logarithmic utility function. Mathematical theorems show that only the log utility function maximizes asymptotic long run wealth and minimizes the expected time to arbitrary large goals. In general, the strategy is risky in the short term but as the number of bets increase, the Kelly bettor's wealth tends to be much larger than those with essentially different strategies. So most of the time, the Kelly bettor will have much more wealth than these other bettors but the Kelly strategy can lead to considerable losses a small percent of the time. There are ways to reduce this risk at the cost of lower expected final wealth using fractional Kelly strategies that blend the Kelly suggested wager with cash. The various classic reprinted papers and the new ones written specifically for this volume cover various aspects of the theory and practice of dynamic investing. Good and bad properties are discussed, as are fixed-mix and volatility induced growth strategies. The relationships with utility theory and the use of these ideas by great investors are featured.Contents: "The Early Ideas and Contributions: "Introduction to the Early Ideas and ContributionsExposition of a New Theory on the Measurement of Risk (translated by Louise Sommer) "(D Bernoulli)"A New Interpretation of Information Rate "(J R Kelly, Jr)"Criteria for Choice among Risky Ventures "(H A Latan‚)"Optimal Gambling Systems for Favorable Games "(L Breiman)"Optimal Gambling Systems for Favorable Games "(E O Thorp)"Portfolio Choice and the Kelly Criterion "(E O Thorp)"Optimal Investment and Consumption Strategies under Risk for a Class of Utility Functions "(N H Hakansson)"On Optimal Myopic Portfolio Policies, with and without Serial Correlation of Yields "(N H Hakansson)"Evidence on the ?Growth-Optimum-Model? "(R Roll)""Classic Papers and Theories: "Introduction to the Classic Papers and TheoriesCompetitive Optimality of Logarithmic Investment "(R M Bell and T M Cover)"A Bound on the Financial Value of Information "(A R Barron and T M Cover)"Asymptotic Optimality and Asymptotic Equipartition Properties of Log-Optimum Investment "(P H Algoet and T M Cover)"Universal Portfolios "(T M Cover)"The Cost of Achieving the Best Portfolio in Hindsight "(E Ordentlich and T M Cover)"Optimal Strategies for Repeated Games "(M Finkelstein and R Whitley)"The Effect of Errors in Means, Variances and Co-Variances on Optimal Portfolio Choice "(V K Chopra and W T Ziemba)"Time to Wealth Goals in Capital Accumulation "(L C MacLean, W T Ziemba, and Y Li)"Survival and Evolutionary Stability of Rule the Kelly "(I V Evstigneev, T Hens, and K R Schenk-Hopp‚)"Application of the Kelly Criterion to Ornstein-Uhlenbeck Processes "(Y Lv and B K Meister)""The Relationship of Kelly Optimization to Asset Allocation: "Introduction to the Relationship of Kelly Optimization to Asset AllocationSurvival and Growth with a Liability: Optimal Portfolio Strategies in Continuous Time "(S Browne)"Growth versus Security in Dynamic Investment Analysis "(L C MacLean, W T Ziemba, and G Blazenko)"Capital Growth with Security "(L C MacLean, R Sanegre, Y Zhao, and W T Ziemba)"


Handbook of Portfolio Construction

Filename: handbook-of-portfolio-construction.pdf
ISBN: 9780387774398
Release Date: 2009-12-12
Number of pages: 794
Author: John B. Guerard, Jr.
Publisher: Springer Science & Business Media

Download and read online Handbook of Portfolio Construction in PDF and EPUB Portfolio construction is fundamental to the investment management process. In the 1950s, Harry Markowitz demonstrated the benefits of efficient diversification by formulating a mathematical program for generating the "efficient frontier" to summarize optimal trade-offs between expected return and risk. The Markowitz framework continues to be used as a basis for both practical portfolio construction and emerging research in financial economics. Such concepts as the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT), for example, provide the foundation for setting benchmarks, for predicting returns and risk, and for performance measurement. This volume showcases original essays by some of today’s most prominent academics and practitioners in the field on the contemporary application of Markowitz techniques. Covering a wide spectrum of topics, including portfolio selection, data mining tests, and multi-factor risk models, the book presents a comprehensive approach to portfolio construction tools, models, frameworks, and analyses, with both practical and theoretical implications.


The World Scientific Handbook of Futures Markets

Filename: the-world-scientific-handbook-of-futures-markets.pdf
ISBN: 9789814566933
Release Date: 2015-08-06
Number of pages: 844
Author: Anastasios G Malliaris
Publisher: World Scientific

Download and read online The World Scientific Handbook of Futures Markets in PDF and EPUB ' The World Scientific Handbook of Futures Markets serves as a definitive source for comprehensive and accessible information in futures markets. The emphasis is on the unique characteristics of futures markets that make them worthy of a special volume. In our judgment, futures markets are currently undergoing remarkable changes as trading is shifting from open outcry to electronic and as the traditional functions of hedging and speculation are extended to include futures as an alternative investment vehicle in traditional portfolios. The unique feature of this volume is the selection of five classic papers that lay the foundations of the futures markets and the invitation to the leading academics who do work in the area to write critical surveys in a dozen important topics. Contents:Introduction:Futures Markets: An Overview (Anastasios G Malliaris and William T Ziemba)Classical Contributions:Proof that Properly Anticipated Prices Fluctuate Randomly (Paul A Samuelson)The Variation of Certain Speculative Prices (Benoit Mandelbrot)Commodity Futures Prices: Some Evidence on Forecast Power, Premiums, and the Theory of Storage (Eugene F Fama and Kenneth R French)Volume and Volatility in Foreign Currency Futures Markets (Ramaprasad Bhar and A G Malliaris)The Strategic and Tactical Value of Commodity Futures (Claude B Erb and Campbell R Harvey)Institutions: New Invited Papers:Central Counterparty Clearing and Systemic Risk Regulation (Robert S Steigerwald)The Fast Track to the Futures: Technological Innovation, Market Microstructure, Market Participants, and the Regulation of High-Frequency Trading (Barbara J Mack)Established Markets: Invited Contributions:Agricultural Futures Markets (Paul E Peterson and Jin Wook Choi)World Metal Markets (Raj Aggarwal, Brian Lucey, and Fergal O''Connor)Interest Rate Futures: Elements of a Successful Financial Innovation (Bluford H Putnam)Currency Futures (Tim Weithers)Energy Futures Markets (Betty Simkins and Yuecheng Jia)New Markets: Invited Contributions:Volatility as an Asset Class (Tom Nohel and Steven K Todd)Housing Futures Markets (Jin Wook Choi and Jin Man Lee)Freight Futures Markets (Fotis Giannakoulis, Nikos Gavriilidis and Nikolas Arachovas)Modeling the Dynamics of Temperature with a View to Weather Derivatives (Eirini Konstantinidi, Gkaren Papazian and George Skiadopoulos)Electricity Futures (Paolo Falbo, Daniele Felletti and Silvana Stefani)Climate Futures Markets (Rita l D''Ecclesia) The European Sovereign Debt Crisis and the Role of Credit Swaps (Eleftherios I Thalassinos, Theodoros Stamatopoulos and Pantelis E Thalassinos)Advanced Topics: Invited Papers:Returns from Investing in S&P500 Futures Options, 1985–2010 (Alexandre Ziegler and William T Ziemba)How to Lose Money in Derivatives: Examples from Hedge Funds and Bank Trading Departments (Sebastien Lleo and William T Ziemba)Nominal GDP Futures Contract Targeting (W William Woolsey and Scott Sumner)The Ethics of Financial Speculation in Futures Markets (Ingo Pies, Matthias Georg Will, Thomas Glauben, and Sören Prehn) Readership: Graduate students and researchers who are interested in the topic of futures markets. Key Features:Collection of classical papers and new critical surveys written by leading academics in financial economicsServes as a definitive source for comprehensive and accessible information in futures marketsEmphasizes the unique characteristics of futures markets Keywords:Futures Markets;Pricing;Risk Management;Futures Trading;Stock Indexes;Interest Rates;Futures Prices;Portfolio Theory;Hedge Funds;Foreign Exchange “Financial futures have spawned enormous innovation in the investment industry over the past four decades. Hedging and speculation in financial markets have been revolutionized. More recently, commodity futures have served as a gateway for institutional investors to a new investible asset class, and not without some interesting controversy over the implications for the underlying commodity markets. The World Scientific Handbook of Futures Markets helps us make sense of these developments with its carefully selected compendium of classic articles by the pioneering giants along with a tasteful assortment of new work that helps bring us to up date with the current state of the field. With this volume, Malliaris and Ziemba have significantly lowered the cost of entry of readers from industry and academia.” Darrell Duffie Dean Witter Distinguished Professor of Finance Graduate School of Business, Stanford University “Twenty years after their inception, Nobel Laureate in Economics, Merton Miller, named financial futures as ‘the most significant innovation of the past two decades’. He peered into the future. These instruments have become an integral part of the financial system in the world's leading economies and are used to hedge and manage risk by international and domestic banks, public and private pension funds, mutual funds, hedge funds, asset and liabilities managers, swap dealers, insurance and mortgage companies, and energy companies. This process has improved national productivity, growth, and standards of living … The World Scientific Handbook of Futures Markets is a welcome addition to the body of expert work providing comprehensive information on futures markets to the world. The papers selected read like the ‘who's who’ of futures markets offering invaluable theoretical and practical information.” Leo Melamed Chairman Emeritus, CME Group “The World Scientific Handbook of Futures Markets is a unique volume thoughtfully edited by Professors Tassos Malliaris and Bill Ziemba, two experts in the field. Classic papers authored by Samuelson, Fama, French and Mandelbrot, among others, demonstrate how the area of futures markets has attracted seminal economists and finance thinkers. The volume also includes 18 original essays covering traditional futures markets, such as agricultural, energy, metals, the more recent financial futures markets such as interest rates, equities and currencies, and finally, new markets such as weather, housing, climate, electricity and freight futures. With its innovative and comprehensive coverage, this forward-looking Handbook instructs and guides both researchers and practitioners in the field of futures markets.” George Constantinides Leo Melamed Professor of Finance University of Chicago Booth School of Business '


The Oxford Handbook of the Economics of Gambling

Filename: the-oxford-handbook-of-the-economics-of-gambling.pdf
ISBN: 9780199797912
Release Date: 2014-01
Number of pages: 720
Author: Leighton Vaughan Williams
Publisher: Oxford University Press

Download and read online The Oxford Handbook of the Economics of Gambling in PDF and EPUB This Handbook is the definitive source of path-breaking research on the economics of gambling. It is divided into sections on casinos, sports betting, horserace betting, betting strategy, motivation, behavior and decision-making in betting markets, prediction markets and political betting, and lotteries and gambling machines.


Mathematical Financial Economics

Filename: mathematical-financial-economics.pdf
ISBN: 9783319165714
Release Date: 2015-05-15
Number of pages: 224
Author: Igor Evstigneev
Publisher: Springer

Download and read online Mathematical Financial Economics in PDF and EPUB This textbook is an elementary introduction to the key topics in mathematical finance and financial economics - two realms of ideas that substantially overlap but are often treated separately from each other. Our goal is to present the highlights in the field, with the emphasis on the financial and economic content of the models, concepts and results. The book provides a novel, unified treatment of the subject by deriving each topic from common fundamental principles and showing the interrelations between the key themes. Although the presentation is fully rigorous, with some rare and clearly marked exceptions, the book restricts itself to the use of only elementary mathematical concepts and techniques. No advanced mathematics (such as stochastic calculus) is used.


Handbook of the Fundamentals of Financial Decision Making

Filename: handbook-of-the-fundamentals-of-financial-decision-making.pdf
ISBN: 9789814417358
Release Date: 2013
Number of pages: 941
Author: Leonard C. MacLean
Publisher: World Scientific

Download and read online Handbook of the Fundamentals of Financial Decision Making in PDF and EPUB This handbook in two parts covers key topics of the theory of financial decision making. Some of the papers discuss real applications or case studies as well. There are a number of new papers that have never been published before especially in Part II.Part I is concerned with Decision Making Under Uncertainty. This includes subsections on Arbitrage, Utility Theory, Risk Aversion and Static Portfolio Theory, and Stochastic Dominance. Part II is concerned with Dynamic Modeling that is the transition for static decision making to multiperiod decision making. The analysis starts with Risk Measures and then discusses Dynamic Portfolio Theory, Tactical Asset Allocation and Asset-Liability Management Using Utility and Goal Based Consumption-Investment Decision Models.A comprehensive set of problems both computational and review and mind expanding with many unsolved problems are in an accompanying problems book. The handbook plus the book of problems form a very strong set of materials for PhD and Masters courses both as the main or as supplementary text in finance theory, financial decision making and portfolio theory. For researchers, it is a valuable resource being an up to date treatment of topics in the classic books on these topics by Johnathan Ingersoll in 1988, and William Ziemba and Raymond Vickson in 1975 (updated 2 nd edition published in 2006).


Quantitative Financial Risk Management

Filename: quantitative-financial-risk-management.pdf
ISBN: 9781118738405
Release Date: 2015-05-06
Number of pages: 448
Author: Constantin Zopounidis
Publisher: John Wiley & Sons

Download and read online Quantitative Financial Risk Management in PDF and EPUB A Comprehensive Guide to Quantitative Financial Risk Management Written by an international team of experts in the field, Quantitative Financial Risk Management: Theory and Practice provides an invaluable guide to the most recent and innovative research on the topics of financial risk management, portfolio management, credit risk modeling, and worldwide financial markets. This comprehensive text reviews the tools and concepts of financial management that draw on the practices of economics, accounting, statistics, econometrics, mathematics, stochastic processes, and computer science and technology. Using the information found in Quantitative Financial Risk Management can help professionals to better manage, monitor, and measure risk, especially in today's uncertain world of globalization, market volatility, and geo-political crisis. Quantitative Financial Risk Management delivers the information, tools, techniques, and most current research in the critical field of risk management. This text offers an essential guide for quantitative analysts, financial professionals, and academic scholars.


Risk Sensitive Investment Management

Filename: risk-sensitive-investment-management.pdf
ISBN: 9789814578066
Release Date: 2014-07-21
Number of pages: 416
Author: Mark H A Davis
Publisher: World Scientific

Download and read online Risk Sensitive Investment Management in PDF and EPUB Over the last two decades, risk-sensitive control has evolved into an innovative and successful framework for solving dynamically a wide range of practical investment management problems. This book shows how to use risk-sensitive investment management to manage portfolios against an investment benchmark, with constraints, and with assets and liabilities. It also addresses model implementation issues in parameter estimation and numerical methods. Most importantly, it shows how to integrate jump-diffusion processes which are crucial to model market crashes. With its emphasis on the interconnection between mathematical techniques and real-world problems, this book will be of interest to both academic researchers and money managers. Risk-sensitive investment management links stochastic control and portfolio management. Because of its distinct emphasis on integrating advanced theoretical concepts into practical dynamic investment management tools, this book stands out from the existing literature in fundamental ways. It goes beyond mainstream research in portfolio management in a traditional static setting. The theoretical developments build on contemporary research in stochastic control theory, but are informed throughout by the need to construct an effective and practical framework for dynamic portfolio management. This book fills a gap in the literature by connecting mathematical techniques with the real world of investment management. Readers seeking to solve key problems such as benchmarked asset management or asset and liability management will certainly find it useful. Contents:Diffusion Models:The Merton ProblemRisk-Sensitive Asset ManagementManaging Against a BenchmarkAsset and Liability ManagementInvestment ConstraintsInfinite Horizon ProblemsJump-Diffusion Models:Jumps in Asset PricesGeneral Jump-Diffusion SettingFund Separation and Fractional Kelly StrategiesManaging Against a Benchmark: Jump-Diffusion CaseAsset and Liability Management: Jump-Diffusion CaseImplementation:Factor and Securities ModelsCase StudiesNumerical MethodsFactor Estimation: Filtering and Black-Litterman Readership: Professionals, researchers, academics and graduate students in the field of investment management, stochastic optimization, stochastic analysis and probability, and quantitative finance. Key Features:Integrates advanced theoretical concepts into practical dynamic investmentDiscusses practical issues that will be relevant to practitioners, including parameter estimation, investment benchmarks, asset and liabilities management (ALM), investment constraints, and the Kelly criterionPresents a thorough treatment of jump diffusion models, including latest developments regarding classical solutions to jump diffusion control problemsWritten by professors with extensive experience on risk sensitive asset management and the relevant financial industry experienceKeywords:Stochastic Control;Risk Sensitive Control;Dynamic Investment Management;Benchmarked Asset Management;Asset and Liability Management;Jump Diffusion Processes;Lévy Processes;Hamilton–Jacobi–Bellman Equations;Classical Solutions;Viscosity Solutions;Kelly Criterion


Problems in Portfolio Theory and the Fundamentals of Financial Decision Making

Filename: problems-in-portfolio-theory-and-the-fundamentals-of-financial-decision-making.pdf
ISBN: 9789814759366
Release Date: 2016-09-29
Number of pages: 212
Author: Leonard C MacLean
Publisher: World Scientific Publishing Company

Download and read online Problems in Portfolio Theory and the Fundamentals of Financial Decision Making in PDF and EPUB This book consists of invaluable introductions, tutorials and problems which are helpful for teaching purposes and have a very broad appeal and usage. The problems cover many aspects of static and dynamic portfolio theory as well as other important subjects such as arbitrage and asset pricing, utility theory, stochastic dominance, risk aversion and static portfolio theory, risk measures, dynamic portfolio theory and asset allocation. This material could be used with important books that cover these topics including MacLean-Ziemba's The Handbook of the Fundamentals of Financial Decision Making, and Ziemba-Vickson's Stochastic Optimization Models in Finance.


The Theory of Gambling and Statistical Logic

Filename: the-theory-of-gambling-and-statistical-logic.pdf
ISBN: 9780123978707
Release Date: 2012-12-28
Number of pages: 465
Author: Richard A. Epstein
Publisher: Academic Press

Download and read online The Theory of Gambling and Statistical Logic in PDF and EPUB Early in his rise to enlightenment, man invented a concept that has since been variously viewed as a vice, a crime, a business, a pleasure, a type of magic, a disease, a folly, a weakness, a form of sexual substitution, an expression of the human instinct. He invented gambling. Recent advances in the field, particularly Parrondo's paradox, have triggered a surge of interest in the statistical and mathematical theory behind gambling. This interest was acknowledge in the motion picture, "21," inspired by the true story of the MIT students who mastered the art of card counting to reap millions from the Vegas casinos. Richard Epstein's classic book on gambling and its mathematical analysis covers the full range of games from penny matching to blackjack, from Tic-Tac-Toe to the stock market (including Edward Thorp's warrant-hedging analysis). He even considers whether statistical inference can shed light on the study of paranormal phenomena. Epstein is witty and insightful, a pleasure to dip into and read and rewarding to study. The book is written at a fairly sophisticated mathematical level; this is not "Gambling for Dummies" or "How To Beat The Odds Without Really Trying." A background in upper-level undergraduate mathematics is helpful for understanding this work. Comprehensive and exciting analysis of all major casino games and variants Covers a wide range of interesting topics not covered in other books on the subject Depth and breadth of its material is unique compared to other books of this nature Richard Epstein's website: www.gamblingtheory.net


Modeling with Stochastic Programming

Filename: modeling-with-stochastic-programming.pdf
ISBN: 9780387878171
Release Date: 2012-06-19
Number of pages: 176
Author: Alan J. King
Publisher: Springer Science & Business Media

Download and read online Modeling with Stochastic Programming in PDF and EPUB While there are several texts on how to solve and analyze stochastic programs, this is the first text to address basic questions about how to model uncertainty, and how to reformulate a deterministic model so that it can be analyzed in a stochastic setting. This text would be suitable as a stand-alone or supplement for a second course in OR/MS or in optimization-oriented engineering disciplines where the instructor wants to explain where models come from and what the fundamental issues are. The book is easy-to-read, highly illustrated with lots of examples and discussions. It will be suitable for graduate students and researchers working in operations research, mathematics, engineering and related departments where there is interest in learning how to model uncertainty. Alan King is a Research Staff Member at IBM's Thomas J. Watson Research Center in New York. Stein W. Wallace is a Professor of Operational Research at Lancaster University Management School in England.


The Handbook of Post Crisis Financial Modelling

Filename: the-handbook-of-post-crisis-financial-modelling.pdf
ISBN: 9781137494498
Release Date: 2016-04-29
Number of pages: 316
Author: Emmanuel Haven
Publisher: Springer

Download and read online The Handbook of Post Crisis Financial Modelling in PDF and EPUB The 2008 financial crisis was a watershed moment which clearly influenced the public's perception of the role of 'finance' in society. Since 2008, a plethora of books and newspaper articles have been produced accusing the academic community of being unable to produce valid models which can accommodate those extreme events. This unique Handbook brings together leading practitioners and academics in the areas of banking, mathematics, and law to present original research on the key issues affecting financial modelling since the 2008 financial crisis. As well as exploring themes of distributional assumptions and efficiency the Handbook also explores how financial modelling can possibly be re-interpreted in light of the 2008 crisis.


Leadership Challenge

Filename: leadership-challenge.pdf
ISBN: 3527503749
Release Date: 2009
Number of pages: 382
Author: James M. Kouzes
Publisher: John Wiley & Sons

Download and read online Leadership Challenge in PDF and EPUB Through research, interviews and the experience of hundreds of managers, Kouzes and Posner show how leadership can be learned and mastered by all. Readable, interesting, and up-to-date. Highly recommended.--Library Journal.