David Sprott Distinguished Lecture by Damir Filipovic, EPFL and Swiss Finance Institute Senior ChairExport this event to calendar

Thursday, April 25, 2019 — 4:00 PM EDT

A Machine Learning Approach to Portfolio Risk Management


Risk measurement, valuation and hedging form an integral task in portfolio risk management for insurance companies and other financial institutions. Portfolio risk arises because the values of constituent assets and liabilities change over time in response to changes in the underlying risk factors. The quantification of this risk requires modeling the dynamic portfolio value process. This boils down to compute conditional expectations of future cash flows over long time horizons, e.g., up to 40 years and beyond, which is computationally challenging. 

This lecture presents a framework for dynamic portfolio risk management in discrete time building on machine learning theory. We learn the replicating martingale of the portfolio from a finite sample of its terminal cumulative cash flow. The learned replicating martingale is in closed form thanks to a suitable choice of the reproducing kernel Hilbert space. We develop an asymptotic theory and prove
convergence and a central limit theorem. We also derive finite sample error bounds and concentration inequalities. As application we compute the value at risk and expected shortfall of the one-year loss of some stylized portfolios.


Damir Filipovic

DAMIR FILIPOVIC

Damir Filipović holds the wissquote Chair in Quantitative Finance at the
Ecole Polytechnique Fédérale de Lausanne (EPFL) and a Swiss Finance Institute Senior Chair. He also acts as head of the Swiss Finance Institute at EPFL.

He holds a PhD in mathematics from ETH Zurich and has been a faculty member of the University of Vienna, the University of Munich and Princeton University. He also worked for the Swiss Federal Office of Private Insurance as co-developer of the Swiss Solvency Test. 

He is on the editorial board of several academic journals. His research focus is in quantitative finance and risk management. His papers have been published in a variety of academic journals including the Journal of Finance, Journal of Financial Economics, Mathematical Finance, Finance and Stochastics, and the Annals of Applied Probability. He is the author of a textbook titled Term-Structure Models. 

     


David A. Sprott (1930-2013)

Professor David Sprott was the first Chair (1967-1975) of the Department of Statistics and Actuarial Science at the University of Waterloo and first Dean of the Faculty of Mathematics (1967-1972). The David Sprott Distinguished Lecture Series was created in recognition of his tremendous leadership at a formative time of our
department, as well as his highly influential research in statistical science.

Location 
STC - Science Teaching Complex
Room: 0020
200 University Ave West
Waterloo, ON N2L 3G1
Canada

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