The effect of bans on short selling: a comprehensive study. Although the 2008 financial crisis has greatly impeded the global economy, it has provided a rare opportunity for researchers to verify the truthfulness of some assumptions made on financial markets that are running without liquidity problems. This project will develop a new option pricing theory suitable for financial markets under some short-selling restrictions. Through exploring, from both empirical and theoretical points of view, h ....The effect of bans on short selling: a comprehensive study. Although the 2008 financial crisis has greatly impeded the global economy, it has provided a rare opportunity for researchers to verify the truthfulness of some assumptions made on financial markets that are running without liquidity problems. This project will develop a new option pricing theory suitable for financial markets under some short-selling restrictions. Through exploring, from both empirical and theoretical points of view, how short-selling bans will affect some important assumptions made in conventional option pricing theory, the newly developed option pricing framework should not only assist in trading options, but also assist market regulators to effectively use bans on short selling to stabilise financial markets.Read moreRead less
Liquidity in financial markets. This project aims to develop a theory which models the effect of liquidity on option prices under different market conditions. Economic or financial crises are inevitable and affect economics. During or after a major financial crisis, market liquidity usually becomes risky and needs to be studied. Through both empirical and theoretical explorations, this project will quantify and measure liquidity risk and its effect on the options markets. It will develop a frame ....Liquidity in financial markets. This project aims to develop a theory which models the effect of liquidity on option prices under different market conditions. Economic or financial crises are inevitable and affect economics. During or after a major financial crisis, market liquidity usually becomes risky and needs to be studied. Through both empirical and theoretical explorations, this project will quantify and measure liquidity risk and its effect on the options markets. It will develop a framework to help market regulators manage illiquidity, enhance the efficiency of option trading in illiquid markets and help in the detection of market manipulation.Read moreRead less
Risk and Reliability in Stochastic Optimisation and Equilibrium. This project seeks to develop theory and methodology in optimisation which take advantage of recent progress in understanding and treating risk in decision making. Problems of optimisation in the face of uncertainty must confront the risk inherent in having to make reliable decisions before knowing the outcomes of crucial random variables on which costs and constraints may depend. Recent theoretical developments, featuring ‘measure ....Risk and Reliability in Stochastic Optimisation and Equilibrium. This project seeks to develop theory and methodology in optimisation which take advantage of recent progress in understanding and treating risk in decision making. Problems of optimisation in the face of uncertainty must confront the risk inherent in having to make reliable decisions before knowing the outcomes of crucial random variables on which costs and constraints may depend. Recent theoretical developments, featuring ‘measures of risk’ beyond just-expected values and quantiles offer hope of major new advances. This project aims to achieve such advances not only in optimisation but also in models of equilibrium that likewise have to deal with uncertainty. Extending current theory and methodology to such multi-stage stochastic models is a challenge. Besides taking up this challenge for its own sake, a major goal of this research will be to use the results in solution algorithms.Read moreRead less
Weather, climate & geological risks: derivative pricing & risk management. This project aims to create new mathematical models and approaches for the fair valuation and hedging of financial derivatives, tackling funding for climate change adaptation and catastrophic disaster risk management. Businesses use derivatives to strategically mitigate financial losses from adverse climate conditions and geological hazards. Expected outcomes are improved models for weather variables and hazard risk asses ....Weather, climate & geological risks: derivative pricing & risk management. This project aims to create new mathematical models and approaches for the fair valuation and hedging of financial derivatives, tackling funding for climate change adaptation and catastrophic disaster risk management. Businesses use derivatives to strategically mitigate financial losses from adverse climate conditions and geological hazards. Expected outcomes are improved models for weather variables and hazard risk assessment; richer methodology from the fusion of mathematical techniques, data analysis and earth sciences perspectives; and quantitative solutions to pressing societal concerns. Significant benefits also include highly qualified personnel training and international collaboration on common multidisciplinary research priorities.Read moreRead less
Fair pricing of superannuation guaranteed benefits with downturn risk. Australians have more than $2.7 trillion in superannuation assets, meaning that Australia is the fourth largest holder of pension fund assets worldwide. Hence the impact of market fluctuations on financial well-being of retirees can be detrimental, especially during market downturns associated with economic crises. The finance industry addresses this issue by complementing variable annuities with riders designed to protect th ....Fair pricing of superannuation guaranteed benefits with downturn risk. Australians have more than $2.7 trillion in superannuation assets, meaning that Australia is the fourth largest holder of pension fund assets worldwide. Hence the impact of market fluctuations on financial well-being of retirees can be detrimental, especially during market downturns associated with economic crises. The finance industry addresses this issue by complementing variable annuities with riders designed to protect the income stream of retirees. This project aims to develop a novel approach to fair pricing and optimal withdrawals and surrender policies for superannuation guaranteed benefit products through a comprehensive analysis of complex optimisation problems in stochastic models of financial markets with downturn risk.Read moreRead less
Multi-person stochastic games with idiosyncratic information flows. The project will develop rigorous mathematical techniques aiming to quantify the impact of different information flows on solutions to decision making problems under uncertainty that are frequently encountered in Financial Economics, Mathematical Finance and Social Sciences.
Can green investors drive the transition to a low emissions economy? The project aims to develop a game-theoretical approach to model the impact of climate change on financial markets by studying the interactions between the government, companies and investors. Expected outcomes include novel solution concepts for stochastic games with heterogeneous beliefs, asymmetric information, and model uncertainty, as well as optimal investment and production strategies under climate driven economic transi ....Can green investors drive the transition to a low emissions economy? The project aims to develop a game-theoretical approach to model the impact of climate change on financial markets by studying the interactions between the government, companies and investors. Expected outcomes include novel solution concepts for stochastic games with heterogeneous beliefs, asymmetric information, and model uncertainty, as well as optimal investment and production strategies under climate driven economic transitions. Results will be used to validate and improve the recently launched Australian based climate transition index. The project should yield significant benefits for the financial industry and investors by providing novel insights into financial risks during the transition to a low emissions economy.Read moreRead less
The predictive, behavioural and economic forecasting performance of alternative credit risk and bankruptcy models: a global study. This study empirically evaluates a range of "new age" credit risk models using a large global sample of failed firms and bond ratings data. The study will provide a substantive body of empirical evidence to assist regulators, creditors, investors and other users assess the merits, strengths and limitations of alternative risk modelling approaches.
Retirement income product innovation. This project aims to develop and assess comprehensive retirement income products to support sustainable retirement income streams for the Australian superannuation system. It will provide a framework to develop flexible structured retirement income products, taking into account the fair and effective allocation of costs and risks. Actuarial and financial analysis will highlight savings in Age Pension and aged care costs arising from more effective design of ....Retirement income product innovation. This project aims to develop and assess comprehensive retirement income products to support sustainable retirement income streams for the Australian superannuation system. It will provide a framework to develop flexible structured retirement income products, taking into account the fair and effective allocation of costs and risks. Actuarial and financial analysis will highlight savings in Age Pension and aged care costs arising from more effective design of retirement income products incorporating investment and longevity risk. It intends to develop risk sharing retirement products, risk management strategies, and longevity index-based hedging contracts to share and mitigate financial and longevity risk.Read moreRead less
Frontiers of Risk Modelling: Dependence and Extremes of Levy Processes. This project plans to continue an ongoing theoretical study into continuous-time stochastic processes, concentrating on developing tools for the further analysis and understanding of extremal and multivariate phenomena with applications to portfolio analysis, value-at risk calculations and complex financial instruments, with particular emphasis on practical applications of the methodologies in the insurance and finance indus ....Frontiers of Risk Modelling: Dependence and Extremes of Levy Processes. This project plans to continue an ongoing theoretical study into continuous-time stochastic processes, concentrating on developing tools for the further analysis and understanding of extremal and multivariate phenomena with applications to portfolio analysis, value-at risk calculations and complex financial instruments, with particular emphasis on practical applications of the methodologies in the insurance and finance industries. Expected outcomes would be of direct interest to these industries as well as having significant mathematical interest.Read moreRead less