The project aims to address issues in the pricing of interest rate derivatives in an illiquid market. In particular, the project will examine the pricing of options on the Brazilian average interbank deposit rate index. A critical element in determining appropriate prices is the volatility implied by observable market prices. However, the lack of liquidity […]

This project concentrates on the scenario optimization method which does not need to make any assumption for the underlying asset distribution and directly incorporate such uncertainty into the objective or constraint functions through stochastic programming. The scenario optimization is performed under different parameters and constraints while Markowitz and Black-Litterman model are taken as the benchmarks […]

A global multi-factor equity model had been previously developed. It employs a group of sector indices for different regions using Dow Jones, MSCI, and indices of local stock exchanges. PCA is used to produce independent factor variables, and then specific equities are regressed against the PCA factors. By transforming factors back into real world variables […]

In recent years, improvements in technology provide the opportunity for investors to use computer algorithms to produce low-cost guidance on possible portfolio investment mixes and strategies. This project is directed at the research and development of one such “Robo- Advisor” algorithm based on forward-looking scenario optimization, in order to determine the efficacy of the strategy. […]