Topics in Quantitative Finance, FIN 500R, Section 1

Philip H. Dybvig
Washington University in Saint Louis

syllabus

Welcome to Topics in Quantitative Finance! This course talks about ideas and situations that challenge our traditional understanding of quantitative finance.

As students sign up to present papers, the schedule will be posted here.

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. Many of the papers can be accessed on JSTOR ("Journal STORage"), an online repository for academic articles. The "Stable URLs" are links on JSTOR. To download the papers for free, you need to use this from a university IP address (or proxy server or VPN), or you can access the papers from other universities. Other links use the university's library proxy server so if you access them from off-campus you will need to use your WUSTL KEY.

The papers with dates were or will be presented in class and you should have some basic knowledge of those papers in the exam. Other papers are supplemental. Knowledge of those papers will be useful but not essential for the exam.

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 unpublished manuscript https://bitcoin.org/bitcoin.pdf

(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

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

(Sept 17) Saleh, Fahad, "Blockchain Without Waste: Proof-of-Stake," working paper, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3183935

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.

Topic 8 Picking Stocks and accounting numbers

(Sept 19) 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.

(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

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.

(Sept 26) Jorion, Philippe, 2000, "Risk Management Lessons from Long-Term Capital Management," European Financial Management 6, 277-300. WashU link.

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

Topic 11 Negative interest rates

(Oct 3) Goodfriend, Marvin, 2016, "The Case for Unencumbering Interest Rates at the Zero Bound," mimeo, CMU, link