I started this website to post a couple of quant finance papers that I enjoyed reading, if anyone else is interested in subcribing please email me.

GregGurevich :at gmail.com

Best,

Greg Gurevich

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Alternative (slow)

In September 1998 the Federal Reserve organized a rescue of Long-Term Capital Management, a very large and prominent hedge fund on the brink of failure. The Fed intervened because it was concerned about possible dire consequences for world financial markets if it allowed the hedge fund to fail. The Fed’s intervention was misguided and unnecessary because LTCM would not have failed anyway, and the Fed’s concerns about the effects of LTCM’s failure on financial markets were exaggerated. In the short run the intervention helped the shareholders and managers of LTCM to get a better deal for themselves than they would otherwise have obtained. The intervention also is having more serious long-term consequences: it encourages more calls for the regulation of hedge-fund activity, which may drive such activity further offshore; it implies a major open-ended extension of Federal Reserve responsibilities, without any
congressional authorization; it implies a return to the discredited doctrine that the Fed should prevent the failure of large financial firms, which encourages irresponsible risk taking; and it undermines the moral authority of Fed policymakers  in their efforts to encourage their counterparts in other countries to persevere with the difficult process of economic liberalization.

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Abstract

We study the identication and estimation of Gorman-Lancaster style hedonic models of demand for dierentiated products for the case when one product characteristic is not observed. Our identication and estimation strategy is a two-step approach in the spirit of Rosen (1974). Relative to Rosen’s approach, we generalize the rst stage estimation to allow for a single dimensional unobserved product characteristic, and also allow the hedonic pricing function to have a general, non-additive structure. In the second stage, if the product space is continuous and the functional form of utility is known then there exists an inversion between the consumer’s choices and her preference parameters. This inversion can be used to recover the distribution of random coecients nonparametrically. For the more common case when the set of products is nite, we use the revealed preference conditions from the hedonic model to develop a Gibbs sampling estimator for the distribution of random coecients. We apply our methods to estimating personal computer demand.

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Alternative (slow)

Michael Lewis (writer of Liars Poker) talks about what went wrong.

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The purpose of this paper is to present a simple quantitative method that improves the risk-adjusted returns across various asset classes. The approach is examined since 1972 in an allocation framework utilizing a combination of publicly traded indices including the Standard and Poor’s 500 Index (S&P 500), Morgan Stanley Capital International Developed Markets Index (MSCI EAFE), Goldman Sachs Commodity Index (GSCI), National Association of Real Estate Investment Trusts Index (NAREIT), and United States Government 10-Year Treasury Bonds. The empirical results are equity-like returns with bond-like volatility and drawdown, and over thirty consecutive years of positive returns.

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This paper develops a simple methodology that yields closed-form analytical approximations for valuing European option claims involving the arithmetic average offuture foreign exchange rates. The main advantage of the approach is that it avoids the need to adopt time-consuming numerical procedures.
The precision of the resulting formula, and the distributional assumption that underlies it, is examined by way of Monte Carlo simulations. (JEL F3 1)

euro-avg-rate-fx

LinWang.pdf