Conferences/Symposia

Research Symposium on Quantitative Risk Management

16 January 2018
10am - 4.30pm
I³ Building, 21 Heng Mui Keng Terrace, Executive Seminar Room, Level 4


The NUS Risk Management Institute (RMI) is pleased to invite participation for its one-day research symposium on quantitative risk management. The symposium will feature three world-leading experts to share ideas and knowledge in this field.

  Speakers
















Programme

10:00 - 10:30 Registration
10:30 - 12:00



Abstract:
Hedging Leverage ETF
Halil Soner

(ETH Zurich )

Leveraged Exchange Traded Fund (ETF) is a recent financial instrument rapidly gaining large market size. These funds promise to provide a certain multiple of the daily return of the underlying ETF. The matching is done daily and is very different than matching in long time. Indeed, suppose that initially the ETF value is S, the amount invested in the Leveraged ETF is X, and the multiplier is b. Then, the fund manager of the Leveraged ETF could hold b (X/S) shares of the ETF. This position would guarantee the required return at the end of the day. For the next day, one needs to repeat the same procedure. This mean the position must move to b(X1/S1) where X1 and S1 are the values at the end of the day. Hence, one needs to make large portfolio movements at the end of each day. This is costly due to transaction costs, front-running and for other reasons. It is also observed that despite the promise there is slight slippage in the return of the Leveraged ETFs. We propose a model taking into these frictions and provide hedging strategies which do not require large portfolio movements. This is a joint work with Min Dai, Steven Kou and Chen Yang.

12:00 - 13:00 Lunch
13:00 – 14:30



Abstract:
Regulatory Policy to Mitigate Potential Risks Arising from Contingent Convertibles
Masaaki Kijima

(Tokyo Metropolitan University)

A Contingent Convertible (CoCo) bond is an instrument that suffers a write-down or converts into equity when the issuing bank is in financial distress. In practice, a trigger event of CoCo takes place when the capital ratio of the bank falls to the pre-defined level or when the national authority declares a trigger at its discretion. The aims of this study are to model CoCos having such triggers and to find effective regulatory policies to handle them. A model for banks issuing CoCos is built within the framework of a structural-default approach. The trigger mechanisms are expressed both in a first passage time model and in a stochastic intensity model. CoCo investors are also included in our model as CoCos are designed to enhance the bank's resilience while shifting their risks to the investors. In the numerical example, we show that the effective regulatory policy, which is intended to mitigate both banks and investors' default risks, changes according to the type of CoCos (write-down or equity conversion) and the impact of the trigger event on the bank asset value process. This is a joint work with Hitomi Ito.

14:30 – 15:00 Coffee break
15:00 – 16:30



Abstract:
Continuous Time Contract Theory and Applications
Nizar Touzi

(Ecole Polytechnique)

Contract theory in economics focuses on social organization by optimizing the incentive of the interacting economic agents so as to account for moral hazard risk. This topic lies at the heart of many relevant real life problems, including insurance tarification, management delegation, regulation, and digital compensation/ tarification policy. We provide some recent results in stochastic control theory which allows to address a wide class of such problems.