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RT @mrgunn: TreeBASE in R: a first tutorial | (R news & tutorials) http://ff.im/HoVWG #rstats #bioinformatics

We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the possibility of default and correlation between different assets. We show how to calculate discounted complex moments by solving a coupled system of generalized Riccati equations. This yields an efficient method to compute prices of power payoffs. European calls and puts as well as binaries and asset-or-nothing options can be priced with the fast Fourier transform methods of Carr and Madan (1999) and Lee (2005). Other European payoffs can be approximated with a linear combination of government bonds, power payoffs and vanilla options. We show the results to be superior to using only government bonds and power payoffs or government bonds and vanilla options. We also give conditions for European continent claims in our framework to be replicable if enough financial instruments are liquidly tradable and study dynamic hedging strategies. As an example we discuss a Heston-type stochastic volatility model with possibility of default and stochastic interest rates.

Financial markets provide an ideal frame for the study of first-passage time events of non-Gaussian correlated dynamics mainly because large data sets are available. Tick-by-tick data of six futures markets are herein considered resulting in fat tailed first-passage time probabilities. The scaling of the return with the standard deviation collapses the probabilities of all markets considered, and also for different time horizons, into single curves, suggesting that first-passage statistics is market independent (at least for high-frequency data). On the other hand, a very closely related quantity, the survival probability, still shows a hyperbolic $t^{-1/2}$ decay typical of a diffusion-like dynamics. Modifications of the Weibull and Student distributions are good candidates for a phenomenological description of first-passage time properties. The scaling strategies shown may be useful for risk control and algorithmic trading.

We develop the fundamental theorem of asset pricing in a probability-free infinite-dimensional setup. We replace the usual assumption of a prior probability by a certain continuity property in the state variable. Probabilities enter then endogenously as full support martingale measures (instead of equivalent martingale measures). A variant of the Harrison-Kreps-Theorem on viability and no arbitrage is shown. Finally, we show how to embed the superhedging problem in a classical infinite-dimensional linear programming problem.

Information Technology, Security and Risk Management: http://amzn.to/ieUVOW

Introduction to Aviation and Risk Management: http://amzn.to/iDXhWY

Global Tax Risk Management: http://amzn.to/mMF8ii

Auditing the Risk Management Process (IIA (Institute of Internal Auditors) Series): http://amzn.to/jIXsfq

10 Questions to Ask Executives About Risk Management http://lnkd.in/MbGNEy

The market can stay irrational longer than you can stay solvent. JM Keynes http://t.co/jEff4Kd

currensee: Like to be in control? Check out @shrcubed's latest blog post about our enhanced risk management feature... http://ow.ly/1dEQ8c

Governance, Risk Management and Compliance Alignment http://wp.me/p1dPnz-2cO

@andrewjdyck i use testthat ;) it has more assertions, prettier results and complements me when my tests pass #rstats

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slides from my R tutorial on Twitter text mining #rstats http://zite.to/oYBJNh via @zite

Jan van Ours, Ben Vollaard, 7 July 2011

Potential victims often ward off crime by taking appropriate precautions. This column argues that government policy targeted at strengthening the precautionary response of potential victims can make a big difference. It shows that mandating the installation of burglar-resistant features in residential construction in the Netherlands reduced burglary risk by 26%.

Full Article: Reducing the invitation to crime