This one-day short course is targeted at graduate students, faculty and other professionals with little or no background in modern portfolio theory and options. These two topics will be covered from a financial engineering point of view with emphasis on applications rather than mathematical derivations. Accordingly, many of the topics in published papers and classical textbooks which involve esoteric mathematics without immediate applicability are set side*. The highlights of the course are the Nobel Prize winning ideas of Markowitz, Black, Scholes, Merton and Sharpe. In the informal discussion surrounding the presentation of course material, topics for research for graduate students will identified. There are many research opportunities, both at the masters and doctoral levels - particularly in the control and signal processing areas.
Prerequisites: Assumed knowledge in undergraduate basics in calculus, matrix algebra and discrete probability. Some programming capability in Matlab is desirable but not essential.
The course is designed so that someone attending only the second part of the course on options, covered largely in the afternoon, will not require notation or results from the first part to follow.
Topics: View of financial engineering, stock market preliminaries, world markets, stock purchase mechanics, short selling, technical analysis, market psychology, price modelling, geometric Brownian motion, binary lattices, risk-reward and mean-variance considerations, covariance, from gambling considerations to the feasible set, diversification and portfolio diagrams, the notion of effciency, the Markowitz theory, the One and Two Fund Theorems, motivation for options, option terminology, the profit-loss diagram, option-price modelling, puts and calls, options as building blocks, straddles, spreads, butterflies,covered calls, iron condors, the Black-Scholes formula, Merton's dividend adjustment, properties of options, arbitrage and related puzzles, course takeaways and conclusions.
Date: Tuesday 7 November, 8.30-5pm
Cost: $300 working professionals, $179 for students. Tea and coffee breaks as well as lunch is included in the ticket price.
Tickets: available for purchase online here
Accommodation: If you are traveling in from out of town listed below is a list of accomodation options near the ANU.
Reference Textbook D. G. Luenberger, Investment Science, second edition, Oxford University Press, 2014.
* Based on his extensive experience trading in financial markets over the years, the following quote by Alan Abelson, in Barron's on January 24, 2009, captures the instructor's point of view: Academic papers on the economy and finance are for the most part like uncooked oatmeal | hard to digest. Particularly unappetizing in that they invariably are peppered with arcane equations, signifying nothing except the need of the author or authors to amortize the time and money wasted in their misspent youths wrestling with advanced math. The point of the exercise is to impart some veneer of gravitas to their pedestrian piffle. Nine times out of ten, the effect is to set even the most determined reader adrift with glazed eyes and nodding head.
B. Ross Barmish is Professor of Electrical and Computer Engineering at the University of Wisconsin, Madison. Prior to joining UW in 1984, he held faculty positions at Yale University and the University of Rochester. From 2001-2003, he served as Chair of the EECS Department at Case Western Reserve while holding the Nord endowed professor- ship. He received his Bachelor's degree in EE from McGill University and the M.S. and Ph.D. degrees, also in EE, from Cornell University.
Throughout his career, he has served the IEEE Control Systems Society in many ca- pacities and has been a consultant for a number of companies. Professor Barmish is the author of the textbook \New Tools for Robustness of Linear Systems" and is a Fellow of both the IEEE and IFAC for his contributions to robust control. He received two Best Journal Publication awards, each covering a three-year period, from the Interna- tional Federation of Automatic Control and has given many keynotes and plenary lectures at major conferences. In 2013, he received the IEEE Control Systems Society Bode Prize.
While his earlier work concentrated on robustness of dynamical systems, his current university research involves building a bridge between feedback control theory and trad- ing in complex nancial markets. In addition to this academic pursuit, in his capacity as CEO of Robust Trading Solutions, his work involves transition of stock-trading al- gorithms from theory to practice and government sponsored research on the NASDAQ Limit Order Book.