Philip H. Dybvig
Washington University in Saint Louis
Welcome to Topics in Quantitative Finance! This course talks about ideas and situations that challenge our traditional understanding of quantitative finance.
Final Exam The final exam will be based on all the classes (including the ones I taught). While the papers have a fair amount of mathematics, the exam will not have any. The questions should be answered using simple English to explain the economics. There is more information on the cover of the sample exam, which is from another year's class. Note that the set of papers covered in the other year was different, and therefore many of the questions and answers may be unfamiliar to you.
Here is the sample exam and an answer sheet (although due to the nature of the exam there are many correct answers):
...final exam pdf size 37K
...suggested answers pdf size 51K
(IMPORTANT) Note that the exam will be closed-book, and that you are not permitted to use any notes or electronics on the exam. There is more information on this on the sample exam and in the syllabus.
To prepare for the exam, I recommend looking at your classmates' slides and the papers below.
Papers Each week we will discuss, in my lectures or in the student presentations, interesting papers. I have some suggested papers you can choose; see http://dybfin.wustl.edu/teaching/topicsquantfin18-shared/index.html. Or, if you want to choose a topic not available there, let me know the topic or topics you are interested in, and the TAs and I will help you to find a suitable paper to present.
I will be posting the papers for this section on this web site. Some of the links use the university's library proxy server so if you access them from off-campus you will need to use your WUSTL KEY. If you do not have a WUSTL KEY, you can copy and paste any jstor addresses into your browser, so long as you are accessing the internet through an appropriate IP address from a participating university.
Topic 1 Bubbles, Doubling Strategies, Suicidal Strategies, and Verification
(Sept 5) Shell, Karl, 1971, "Notes on the Economics of Infinity," 1971, Journal of Political Economy 79. Stable URL: http://www.jstor.org/stable/1830269.
(Sept 5) Dybvig, Philip H. "Perpetual American Put: valuation and verification theorem," lecture notes, link
Topic 2 High frequency trading
(Sept 12) Golub, Anton, John Keane, and Ser-Huang Poon, 2012, High Frequency Trading and Mini Flash Crash, working paper. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2182097. slides by Zhiwen Shen
Topic 3 Chinese markets and FX
(Sept 10) Kehoe, Timothy J., and Kim J. Ruhl, 2010, "Why Have Economic Reforms in Mexico Not Generated Growth?" Journal of Economic Literature 48, No. 4, pp. 1005-1027 WashU link slides by Stefan Yu.
Topic 4 Crypto-currencies
(Sept 12) Nakamoto, Satoshi. "Bitcoin: A peer-to-peer electronic cash system." (2008). unpublished manuscript https://bitcoin.org/bitcoin.pdf slides by Kartikeya Agarwal
(Sept 24) Hayes, Adam, 2017, "Cryptocurrency value formation: An empirical study leading to a cost of production model for valuing bitcoin," Telematics and Informatics 34, 1308-1321. https://www.researchgate.net/publication/303094852. slides by Neil (Ke) Xu
Topic 5 P2P Lending and FinTech
(Sept 10) Da, Zhi, Xing Huang, and Lawrence J. Jin, "Extrapolative Beliefs in the Cross-Section: What Can We Learn from the Crowds?" working paper https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3144849. slides by Alexander Cruise
Topic 6 Blockchain
(Sept 19) Cong, Lin William and He, Zhiguo, Blockchain Disruption and Smart Contracts. https://ssrn.com/abstract=2985764 slides by Lewis Luo
(Sept 17) Saleh, Fahad, "Blockchain Without Waste: Proof-of-Stake," working paper, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3183935 slides by Lexing Fang
Topic 7 Mutual Fund Performance
performance measurement:
(Sept 17) Hunter, David L. and Kandel , Eugene and Kandel (deceased), Shmuel and Wermers, Russ, 2014, Mutual Fund Performance Evaluation with Active Peer Benchmarks, Journal of Financial Economics 112, 1-29 WashU link. slides by Jianyi Xu
Topic 8 Picking Stocks and accounting numbers
(Oct 8) Allen, Eric J., Chad R. Larson, and Richard G. Sloan, 2013, "Accrual reversals, earnings, and stock returns, Journal of Accounting and Economics 56, 113-129. WashU link. slides by Xiaohan (Hannah) Jiang
(Oct 3) Nissim, Doron, and Stephen H. Penman, 2001, "Ratio Analysis and Equity Valuation: From Research to Practice," Review of Accounting Studies 6, 109-54. WashU link slides by Alyssa Rong
Topic 9 Risk management
(Sept 24) Philip H. Dybvig, Pierre Jinghong Liang, and William J. Marshall, 2013, "The New Risk Management: The Good, the Bad, and the Ugly," Federal Reserve Bank of Saint Louis Review, July/August 2013, 95(4) 273--91. http://research.stlouisfed.org/publications/review/article/9914. slides by Elena (Xin) Cao
(Sept 26) Jorion, Philippe, 2000, "Risk Management Lessons from Long-Term Capital Management," European Financial Management 6, 277-300. WashU link. slides by Shuyu Shang
Topic 10 Compensation and incentives
(Sept 26) Ross, Stephen A., 2004, "Compensation, Incentives, and the Duality of Risk Aversion and Riskiness," Journal of Finance 59, 207-225, https://www.jstor.org/stable/3694894 slides by Andrew Holtzman
Topic 11 Negative interest rates
(Oct 3) Goodfriend, Marvin, 2016, "The Case for Unencumbering Interest Rates at the Zero Bound," mimeo, CMU, link slides by Xiangjun Chen
Topic 12 Option Pricing
(Oct 8) Han, Jiequn, Arnulf Jentzen, and Weinan E, Solving High-Dimensional Partial Differential Equations Using Deep Learning, working paper https://arxiv.org/abs/1707.02568 slides by Aishwarya Singh