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Hunting Down the Black Swan: Correlation, contagion and endogenous risk in financial markets by Professor Rama Cont Imperial College London

When Nov 27, 2012
from 05:00 PM to 06:00 PM
Where Centre for Mathematical Sciences, Room MR2
Contact Name
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Professor Rama Cont Imperial College London

Tuesday 27th November 2012, 5.00pm Centre for Mathematical Sciences, Cambridge University http://www.cms.cam.ac.uk/visiting/ Room MR2

Hunting down the Black Swan: Correlation, contagion and endogenous risk in financial markets

Prices, volatilities and correlation parameters often exhibit erratic behaviour and extreme fluctuations during market crises. The traditional approach has been to either model these occurrences as "extreme" events or statistical outliers, or entirely dismiss them as 'black swans', impossible to model quantitatively. We argue that many such 'black swans' are in fact manifestations of endogenous market instabilities that arise as a result of feedback effects between price behaviour and the resulting supply/demand dynamics generated by market participants. We propose some simple models which allow quantitative modelling of such endogenous risks and present some applications to the Quant Crash of August 2007 and the Great Deleveraging following the collapse of Lehman Brothers.

Join Professor Rama Cont for wine and canapes in the Centre for Mathematical Sciences after the seminar.

Rama Cont is Professor of Mathematics and Chair in Mathematical Finance at Imperial College London. http://www3.imperial.ac.uk/people/r.cont
Rama joined Imperial College in 2012 after holding teaching and research positions at Ecole Polytechnique (France), Columbia University (New York) and Université Pierre & Marie Curie (Paris VI). Professor Cont holds a Doctorat from Université de Paris Sud (Orsay), a Masters degree in Theoretical Physics from Ecole Normale Supérieure (Paris) and an engineering degree from Ecole Polytechnique (France).
His research focuses on stochastic analysis, stochastic processes and mathematical modeling in finance, in particular the modeling of extreme market risks: discontinuities in market behavior, extreme risks, endogenous risk and systemic risk. He has co-authored Financial Modelling with Jump Processes (2003) and is the Editor-in-Chief of the Encyclopedia of Quantitative Finance (Wiley 2010). He was elected Chair of the SIAM Activity Group on Financial Mathematics and Financial Engineering in 2010.
Prof. Cont was awarded the Louis Bachelier Prize by the French Academy of Sciences in 2010 for his research on mathematical modeling in finance.

The seminar is sponsored by Cantab Capital Partners.
Please RSVP to: anne.lawrence@cantabcapital.com if you wish to attend.

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