MCFAM Seminar Series: “Efficient Exposure Frontiers"
Please join us for our last seminar of spring semester. This seminar will feature Dilip Madan from the University of Maryland who will discuss efficient exposure frontiers.
About the lecture
Risk is described by the instantaneous exposure to changes in valuations induced by the arrival rate of economic shocks. The arrival rate measure is typically not a probability measure, and often the aggregate arrival rate across all shocks is infinite. Risk management and portfolio theory are consequently recast as managing this exposure risk. There is no risk free exposure with all fixed income securities subject to the risks of instantaneous changes in their valuations. The reference return in the economy is that of a zero risk gradient return, typically estimated as negative. Required returns on assets with low risk gradients are then negative. It is also observed that required returns are robust to positions on the efficient frontier as well the construction of the frontier itself. Both equity and fixed income security frontiers are constructed as illustrations of efficient risk positions.
About the speaker
Dilip Madan is a professor of finance at the Robert H. Smith School of Business at the University of Maryland. He specializes in mathematical finance. Currently, he serves as a consultant to Morgan Stanley, Meru Capital, and Caspian Capital. He has also consulted with Citigroup, Bloomberg, the FDIC, and Wachovia Securities. He is a founding member and past president of the Bachelier Finance Society. He received the 2006 von Humboldt award in applied mathematics, was the 2007 Risk Magazine Quant of the year, received the 2008 Medal for Science from the University of Bologna, and held the 2010 Eurandom Chair.