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 4) Shell, Karl, 1971, "Notes on the Economics of Infinity," 1971, Journal of Political Economy 79. Stable URL: http://www.jstor.org/stable/1830269.
(Sept 4) Dybvig, Philip H. "Perpetual American Put: valuation and verification theorem," lecture notes, link
Topic 2 Textual Analysis Tools
(Sept 13) Kelly, Bryan, Manela, Asaf, & Moreira Alan (2018) Text Selection, Working paper http://apps.olin.wustl.edu/faculty/manela/kmm/textselection/textselection.pdf slides by Jian Tu
(Sept 6) Tetlock, P. C. (2007). Giving content to investor sentiment: The role of media in the stock market. The Journal of finance, 62(3), 1139-1168. http://www.jstor.org/stable/4622297. slides by Jackie Yichuan Yan
(Oct 2) Hanley, K. W., & Hoberg, G. (2016). Dynamic interpretation of emerging systemic risks, working paper. https://ssrn.com/abstract=2792943 slides by Symphony Liu
Topic 3 Macroeconomic Growth
(Sept 11) Acemoglu, Doron, David Autor, David Dorn, Gordon H. Hanson, and Brendan Price, 2014, Return of the Solow Paradox? IT, Productivity, and Employment in US Manufacturing, American Economic Review 104, 394-99. WashU link online appendix. slides by Eric Chen
Topic 4 P2P Lending and FinTech
(Sept 18) Chava, Sudheer and Nikhil Paradkar, "Winners and Losers of Marketplace Lending: Evidence from Borrower Credit Dynamics," working paper http://www.cafr-sif.com 18 18selected/87. Winners and Losers of Marketplace Lending_ Evidence from Borrower Credit Dynamics.pdf slides by Taryn Shen
Topic 5 High frequency trading
(Sept 20) O'Hara, Maureen, "High Frequency Market Microstructure, Journal of Financial Economics 116, Issue 2, May 2015, Pages 257-270 WashU link. slides by Jiaqi Liu
Topic 6 Picking Stocks and accounting numbers
(Sept 18) Ghosh, Aloke, Zhaoyang Gu, and Prem C. Jain, 2005, "Sustained Earnings and Revenue Growth, Earnings Quality, and Earnings Response Coefficients," Review of Accounting Studies 10, 33-57. WashU link. slides by Xiaoyue Liang
(Sept 25) Sloan, Richard G., 1998, "Do Stock Prices Fully Reflect Information in Accruals and Cash Flows About Future Earnings?" Accounting Review 71, 289-315. http://www.jstor.org/stable/248290. slides by Eva Hongwen Cao
Topic 7 Understanding the financial crisis.
(Sept 13) Gorton, Gary, and Andrew Metrick, 2012, "Getting Up to Speed on the Financial Crisis: A One-Weekend-Reader's Guide," Journal of Economic Literature 50, 128-150. Link: WashU link. slides by Harrison Li
Topic 8 Finance in Africa
(Sept 20) Gokcekus, Omer and Yui Suzuki, 2016, Mixing Washington Consensus with Beijing Consensus and Corruption in Africa, Singapore Economic Review 61. WashU link. slides by Li Dong
Topic 9 Anti-corruption Campaign
(Sept 25) Lin, Chen, Randall Morck, Bernard Yeung, and Xiaofeng Zhao, 2016, Anti-Corruption Reforms and Shareholder Valuations: Event Study Evidence from China, 2016 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2729087. slides by Pengyi Pan
(Sept 27) Wang, Qian, T. J. Wong, Lijun Xia, 2008, State ownership, the institutional environment, and auditor choice: Evidence from China, Journal of Accounting and Economics 46, 112-134 WashU link slides by Carl Chen
Topic 10 Employee Stock Options
(Sept 27) Dybvig, Philip H. and Mark Loewenstein, 2003, "Employee Reload Options: Pricing, Hedging, and Optimal Exercise," Review of Financial Studies 16, 2003, 145-171. Stable URL: http://www.jstor.org/stable/1262728 slides by Jackie Jiqi Sun
Topic 11 Crypto-currencies
(Oct 2) Hu, Albert S., Christine A. Parlour, and Uday Rajan, "Cryptocurrencies: Stylized Facts on a New Investible Instrument," working paper, http://webuser.bus.umich.edu/urajan/research/crypto.pdf slides by Jobber Shi
Topic 12 Indian Economy
(Oct 9) Jayachandran, Seema, and Rohini Pande. 2017. "Why Are Indian Children So Short? The Role of Birth Order and Son Preference." American Economic Review, 107 (9): 2600-2629. WashU link slides by Jack Slezak
Topic 13 Option Pricing
(Oct 9) Carr, Peter, 2016, Yield Curves and Volatility Smiles, working paper WashU link slides by Jingsheng Zhang