RESEARCH UPDATES

Industry Projects

Under the leadership of our Deputy Director for Industry Prof. Chen Kan, RMI has continued to make advances in the industry projects, which aim at developing models and tools for industrial applications, establish industry research program for training students on the use of analytic tools and methods for quantitative risk management, as well as establish industry collaborations. In 2023, the projects team worked on publishing some research papers in relevant journals and training students.

Researchers at RMI have made significant advances in their research on modeling correlation and dependency structures in the cryptocurrency market; the effect of increasing correlation in the down market is shown to be very strong. The work is extended to constructing a more general framework of portfolio construction based on generative models of asset returns. A paper on this has been sent for publication. Research is also underway to develop a more efficient vine-copula package.

RMI researchers have also continued to work on text-based industry classification. For the past year, the research has focused on the construction of industry classification based on the business description extracted from the earnings reports of the companies listed in the US and Chinese markets. The team has built a comprehensive package to allow for different algorithms for word embedding and clustering, which is relatively efficient and easy to use. They have found that the use of the new technique based on UMAP for clustering is particularly effective in generating good industry classification. The industry projects team are finalizing the results of the text-based industry classification in the US and China markets and also exploring the application of NLP and machine learning tools to study the classification of company news announcements.

RMI researchers are also working on an interdisciplinary research project based on Complex System Approach which is supported by an NUS grant on urban resiliency. Working from a risk management perspective the RMI team has developed a quantitative tail risk measure for financial risks as well as risks associated with natural disasters. The measure is based on the most probable maximum value of the risk over a certain time frame (MPMR). For many types of tail risks, such measure scales with the time frame T as a power law. A paper on this research has been published in the Journal of Finance and Data Science. One more paper on the detailed techniques for computing MPMR and a paper on applying the technique for characterizing climate risk are under preparation. The RMI team is also working on characterizing risk propagation in supply-chain networks.

Conference, Seminars, and Other Events

In addition to the two annual conferences, RMI also hosted two conferences on quantitative economics and finance, in honor of distinguished visitors. The first was held on 6 March 2023 in honour of Professor Thomas J. Sargent who is the Professor of Economics at New York University and Nobel Laureate (Economics, 2011). The second conference was held on 3 August 2023 in honour of Professor Lars Peter Hansen, David Rockefeller Distinguished Service Professor in Economics, Statistics, Booth School of Business & The College, University of Chicago and Nobel Laureate (Economics, 2013). Both these conferences featured presentations from academics from NUS and other universities, who shared some insights into their latest work and was attended by academics, students and some industry participants.

In addition to the conferences, RMI also hosted several seminars throughout last year. Two seminars were conducted by Prof. Chew Soo Hong Emeritus Professor at the National University of Singapore (NUS) and Professor at the Southwestern University of Finance and Economics. His first seminar on 7 March 2023 was on “Attention Theory” and second on 10 March 2023 was on the topic “Rice Culture, Social Efficiency Orientation, and Evidence for Gene x Culture Coevolution”. Another seminar on “Complexity in Factor Pricing Models” by Associate Professor Semyon Malamud who is an SFI Associate Professor at the Ecole Polytechnique Fédérale de Lausanne, was held on 14 April 2023. Next, on 24 May 2023 RMI hosted a seminar titled, “On Martingale Optimal Transport” by Prof. Nizar Touzi, Professor of Applied Mathematics at Ecole Polytechnique.

Lastly, RMI also hosted a webinar jointly hosted with Department of Mathematics on 22 November 2023. The topic of the webinar was “On the Relevance and Appropriateness of Name Concentration Risk Adjustments for Portfolios of Multilateral Development Banks” and was conducted by Prof. Eva Lütkebohmert, Professor for Quantitative Finance at the University of Freiburg.