EWGCFM 2018

61st Meeting of EURO Working Group for Commodities and Financial Modelling, 16-18 MAY 2018, Kaunas, Lithuania.

EWGCFM 2018

This conference brings together scientific experts on financial modelling, statistics and economics, decision-making analysis and methods, LittleData to BigData in finance and investment, game theory and mathematical economics, banking, insurance, pension planning, pricing and hedging of derivatives, credit and systemic risk, application of OR methods in finance etc.

The conference is organized by the Faculty of Mathematics and Natural Sciences, Kaunas University of Technology together with EURO Working Group for Commodities and Financial Modelling (EWGCFM).

Plenary Talks

Miloš Kopa (Charles University, Czech Republic)

Portfolio optimization with stochastic dominance constraints

We introduce new problems for portfolio selection based on stochastic dominance criteria. The goal of an investor is to maximaze mean return of a portfolio under condition that the portfolio dominates a benchmark in the sense of a chosen type of stochastic dominance. These problems may serve as alternatives to well-known mean-risk models. The advantage of the these problems is that the optimal portfolio is preferred to the benchmark for all rational investors satisfying given assumsptions, for example risk aversion, decreasing risk aversion, etc. We present the tractable formulations of these problems under assumption of empirical distribution of returns. We apply our problems to several historical US stock market datasets.

Co-author: Thierry Post, Nazarbayev University Astana, Kazakhstan

More about Miloš Kopa

Gerhard-Wilhelm Weber (Poznan University of Technology, Poland)

Stochastic optimal control of impulsive systems with regime switches and paradigm shifts – for finance, economics and science

We contribute to modern Operational Research by hybrid, e.g., mixed  continuous-discrete dynamics of stochastic differential equations with  jumps and to its optimal control. These hybrid systems allow for the representation of (random) regime switches or (in cultural terms) paradigm shifts, and are of growing importance in biology, neuroscience and medicine, in economics,  finance and engineering.

We introduce three new approaches to this area of stochastic optimal control and present results. One is analytical and bases on the finding of optimality conditions and, in certain cases, closed-form solutions. We further discuss the impact of differences in information, given by delay or insider information, name results and applications. Eventually, we introduce emerging “human”, “neural” and “behavioral” aspects into our analytic study and show upcoming research challenges.

The presentation ends with a conclusion and an outlook to future investigations.

Co-author: Dr. Emel Savku, TED University, Ankara, Turkey

More about Gerhard-Wilhelm Weber

Stan Uryasev (University of Florida, USA)

Risk Management with POE, VaR, CVaR, and bPOE: Applications in Finance

This paper compares four closely related probabilistic measures: Probability of Exceedance (POE), Value-at-Risk (VaR) which is a quantile, Conditional Value-at-Risk (CVaR), and Buffered Probability of Exceedance (bPOE).
The Probability of Exceedance (POE) is frequently used to measure uncertainties in outcomes. For instance, POE is used to estimate probability that assets of a company fall below liabilities. POE measures only the frequency of outcomes and ignores magnitude of outcomes. POE counts outcomes exceeds the threshold, and it “does not worry” about the amount by which each outcome exceeds the threshold. POE is lumping together all threshold exceedance events, potentially “hiding” quite large and very troublesome outcomes. Moreover, POE has poor mathematical properties when used to characterize discrete distributions of random values (e.g., when distributions are defined by observed historical data). POE for discrete distributions is a discontinuous function of control variables, making it difficult to analyze and optimize. POE is used for defining financial ratings of companies and financial derivative instruments (such as CDO).

This presentation discusses a new probabilistic characteristic called Buffered Probability of Exceedance (bPOE). With bPOE, it is possible to count outcomes close to a threshold value, rather than only outcomes exceeding the threshold. To be more precise, bPOE counts tail outcomes averaging to some specific threshold value. For instance, 4% of land-falling hurricanes in US have cumulative damage exceeding $50 billion (i.e., POE = 0.04 for threshold=$50 billion). It is estimated, that the average damage from the worst 10% of hurricanes is $50 billion. In terms of bPOE, we say bPOE=0.1 for threshold=$50 billion. bPOE shows that largest damages having magnitude around $50 billion have frequency 10%. bPOE can be considered as an important supplement to POE. We think that bPOE should be routinely calculated together with POE. This example shows that bPOE exceeds POE, which is why it is called Buffered Probability of Exceedance. The positive difference, bPOE-POE, can be interpreted as some “buffer.” bPOE is an inverse function of CVaR and it inherits a majority of the exceptional mathematical properties of CVaR (which is a so called “coherent measure of risk”). Similar to CVaR, minimization of bPOE can be reduced to convex and Linear Programming.
We will discuss two applications of bPOE concept. The first application discusses the possibility of redefining financial ratings using bPOE concept. The second application considers the Cash Matching Problem of a Bond Portfolio.
Co-author:  Giorgi Pertaia

More about Stan Uryasev

Registration starts:  10 December 2017

Abstract submission and confirmation deadline: 01 March 2018

Early bird payment deadline: 01 March 2018

Preliminary program: 1 May 2018

Conference: 16-18 May 2018

Paper submission: after conference

  • Financial modelling
  • Statistics and economics
  • Decision-making analysis and methods
  • Energy market and commodities
  • LittleData to BigData in finance and investment
  • Game theory and mathematical economics
  • Banking
  • P2P credits
  • Blockchain and crypto currencies
  • Insurance
  • Pension planning
  • Pricing and hedging of derivatives
  • Credit and systemic risk
  • Application of OR methods in finance
  • Personal finance
  • etc.

Most of evets will take place in “KTU Santaka Valley”, K. Baršausko g. 59, Kaunas. SANTAKA is Integrated Science, Studies and Business Centre (Valley).

More about Kaunas (the city where H. Minkowski was born) please find at https://en.wikipedia.org/wiki/Kaunas or http://visit.kaunas.lt/en/kaunastic.

Kaunas University of Technology (KTU) is established in 1922 and is biggest technology university in Baltic States.

If you need Schengen visa please consult Lithuania Schengen Visa Application Requirements and organizing committee for invitation.

Registration fee includes VAT

Early bird

(before 01 March)

Late

(before 15 April)

Last minute

(after 15 April)

regular 300 350 400
student 150 175 200
accompanying person 100 100 150
social events 75 100 150
  • Regular fee includes all conference scientific and social events and conference package.
  • Student fee includes conference scientific events, conference package and welcome afternoon.
  • Accompanying person fee includes conference scientific and social events.
  • Social events fee includes welcome afternoon, conference dinner and excursion (on the same day).

All participants must arrange accommodation by their personal responsibility. Kaunas hotels are located in city centre.

The conference venue may be reached in approx. 15-20 min by city bus/trolleybus from the hotel.

18-20 May Kaunas city celebrates its birthday and organizes Hanseatic days (a medieval festival). Please consider this and book the hotel as early as possible.

16 May welcome afternoon at “KTU Santaka Valley” (including local snacks etc.)

17 May afternoon, visiting nice site-seeing places:

18 May Hanseatic days (a medieval festival) in the old town (optional, not part of the conference).

All presenters of the conference must register before the deadline. During the registration procedure the title and abstract (approx. 400 words) have be submitted. Only papers based on conference presentation will be considered for publication.

All papers (short version) prepared based on a presentation at the conference are welcome to be submitted (free of charge) for the publishing in „Journal of Mathematical Models in Engineering“ (MME), ISSN (Print) 2351-5279, ISSN (Online) 2424-4627 http://www.jvejournals.com/mme.

High quality papers can be submitted to journal “Engineering Economics” (IF(2016)=0.726) http://www.inzeko.ktu.lt/index.php/EE with regular reviewing procedure. Depending on number of accepted papers, they will be printed in a special chapter or in separate issues.

Organizing committee:

  • Audrius Kabašinskas (Chair, Kaunas University of Technology)
  • Bronė Narkevičienė (Kaunas University of Technology)
  • Kristina Poškuvienė (Kaunas University of Technology)
  • Kristina Šutienė (Kaunas University of Technology)
  • Gabija Valiukienė (Kaunas University of Technology)
  • Audrius Kabašinskas (Kaunas University of Technology, Lithuania)
  • Gerhard-Wilhelm Weber (Middle East Technical University, Turkey)
  • Gintautas Dzemyda (VU Institute of Mathematics and Informatics, Lithuania)
  • Edvardas Zavadskas (Vilnius Gediminas Technical University, Lithuania)
  • Leonidas Sakalauskas (VU Institute of Mathematics and Informatics, Lithuania)
  • Eugene Kashdan (University College Dublin , Ireland)
  • Svetlozar (Zari) Rachev (FinAnalytica INC, USA)
  • Ivan Marović (Rijeka University, Croatia)
  • Miloš Kopa (Charles University Prague, Czech republic)
  • Francesca Maggioni (University of Bergamo, Italy)
  • Stefan Voss (University of Hamburg, Germany)
  • Georg Pflug (University of Vienna, Austria)
  • Vitalijus Denisovas (Klaipeda University, Lithuania)
  • Rimantas Šeinauskas (Kaunas University of Technology, Lithuania)
  • Kristina Šutienė (Kaunas University of Technology, Lithuania)
  • Kristina Poškuvienė (Kaunas University of Technology, Lithuania)
  • Rytis Krušinskas (Kaunas University of Technology, Lithuania)
  • Bronius Neverauskas (Kaunas University of Technology, Lithuania)

Contacts

Organizing Committee of EWGCFM2018 Conference

Kaunas University of Technology
Faculty of Mathematics and Natural Sciences
Studentų str. 50-141
51368 Kaunas
LITHUANIA

E-mailewgcfm2018@ktu.lt

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