RisKontroller Posts and Opinions
- Himadri Bhattacharya 19 July 2022. RBI’s low dividend payout raises concerns – A brilliant article on India’s central bank.
1 “Super-Exponential RE Bubble Model with Efficient Crashes” 2018: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3064668
Basic foundation of new theory on financial bubble creation, mitigation, and advantaging. With 18 months on SSRN Top 10 list. Including several examples on real financial bubbles showing outperformance of the strategy.
2 “Bitcoin Bubble Trouble” 2018: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3143750
Application to the bitcoin crash with a crash prediction on December 19, 2017 successfully estimating the size of the upcoming crash.
3 “Awareness of Crash Risk Improves Kelly Strategies in Simulated Financial Time Series” 2020: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3580920
This paper looks at our method run against simulations of price data showing how assuming prices consist of Brownian motion plus jumps oscillating around a normal price that can provide strategies with successful outperformance and the method is robust in the parameter estimation.
4 “Crash-sensitive Kelly Strategy built on a modified Kreuser-Sornette bubble model tested over three decades of twenty equity indices” 2020: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3708035
This paper looks at a slight modification of the original strategy and how well it outperforms on 20 real equity price indices over a period of 30 years. More specifically it outlines the rational for picking the parameter and window sizes.
5 “Efficient Crashes Optimization at a Large Fund in India” 2021: Forthcoming: A version is currently available on request. The final version will be published shortly showing the outperformance of a large mutual fund in India using the ECO strategy.
Sovereign Risk Management
SWF and Central Bank Papers modeled with dynamic tree structures of uncertainty
- “Strategic foreign reserves risk management: Analytical framework” by Claessens and Kreuser in Annals of Operations Research 2007. We present the dynamic framework for SWFs.
- “Strategic Investment and Risk Management for Sovereign Wealth Funds” by Claessens and Kreuser published in proceedings. We discuss the dynamic stochastic framework for managing risk in SWFs with an applications to Norway’s Sovereign Wealth Fund.
- “A Sovereign Asset-Liability Framework with Multiple Risk Factors for External Reserves Management – Reserve Bank of India” by Bhattacharya, Kreuser, and Sivakumar. Application to the Central Bank of India
See also our Pro Forma portfolio performance using the same technology at AugurMax Portfolio Performance
24-26 September 2018 Presentation at QuantMinds Americas in Boston: We presented and discussed our work on Busting Bubbles; Applications of a new rational expectations bubble model.
27 October 2018 updated RIsKontroller Review We discuss both the bubble model and an overview of the RisKontroller Technology.
11 January 2017: Presenting a series of lectures on Misbehavior in the Markets this Spring at the Arlington Community Center.
22 December 2017: We called the Bitcoin bubble and mitigated its crash. See our short paper above.
10 December 2016 News: Prof. Dr. Jérôme Kreuser will speak on bubbles, their prediction, quantification, and mitigation at the QWAFAFEW (Quantitative Work Alliance for Applied Finance Education and Wisdom) meeting on January 24 in New York. Bubbles are percolating and yes, many are quantifiable. We discuss and debate theory and empirics.
10 December 2016 News: RisKontroller Global is now providing bubble prediction, quantification, and mitigation analytics to SBI Funds Management Private Limited which is a Joint venture between the State Bank of India (SBI) and AMUNDI of France.
10 October 2016 News: Stijn Claessens (Now at BIS) and Jérôme Kreuser developed an asset and liability management model for Norway’s Government Pension Fund Global and presented a paper on it at the Central Bank Reserves and Sovereign Wealth Management Conference in Frankfurt in 2008. The model was calibrated prior to the Lehman collapse. We predicted an expected value of the portfolio to September 2016 of NOK 7.53 trillion, which is recorded in the conference proceedings paper (Reference below). Eight years on we were right on. The published paper is available in the conference proceeding, in ResearchGate, or from me.
We will be back on line soon.
Newsletter 1 – 21 January 2019: Topics include
- Is S&P 500 crashing or rallying? Details on the application of our bubble mitigation technology applied to the S&P. Our results show a different picture than the popular press.
- Our AugurMax performance summary. Had some problems in December but did well throughout the year 2018.
Papers, Publications, and Opinions
Himadri Bhattacharya discusses the implications of RBI’s fat dividend payout to the government and the implications of risk management for RBI. The article is from the Chennai BusinessLine, September 12, 2019.
Kreuser, Jerome and Didier Sornette. 2018 (updated). “Super-Exponential RE Bubble Model with Efficient Crashes”, Submitted for Publication in the European Journal of Finance and under review. We propose a dynamic Rational Expectations (RE) bubble model of prices with the intention to exploit it for and evaluate it on optimal investment strategies. Our bubble model is defined as a geometric Brownian motion combined with separate crash (and rally) discrete jump distributions associated with positive (and negative) bubbles. We have tested and include in the paper the analysis of our bubble model on several historical jumps. A recent version of the paper is available Efficient Crashes Paper Version 4-June-2018.
See Kreuser, Jérôme (2012) “Correcting the Financial Crisis Failures of Asset–Liability Management (ALM) Risk Management”, in Bob Swarup (ed). Asset Liability Management for Financial Institutions: Balancing Financial Stability with Strategic Objectives. London, UK: Bloomsbury Information Ltd, May.
See Kreuser, Jérôme and Morton Lane (2013) “ILS Market-Derived Metrics: Finding the Market Transform”, in Alternative (Re)Insurance Strategies, Risk Books, Edited by Morton Lane; “Best paper of the AAI Colloquium of Lyon 2013.”
Some Additional Publications
More can be found here.
Kreuser, Jerome (2014). “Risk Management in Public Institutions is Different: Everyone is Different in its Own Way“, March 11, 2014 – a seminar presented at ETH Zurich.
Kreuser, J.L. (ed.), 2012. Risk Management for Sovereign Institutions: Innovations in strategic risk management for volatile times, The Marketing & Management Collection, Henry Stewart Talks Ltd, London
Bhattacharya, Himadri, Jerome Kreuser, and Sivaprakasam Sivakumar (2011). “A sovereign asset–liability framework with multiple risk factors for external reserves management—Reserve Bank of India.” in Portfolio and Risk Management for Central Banks and Sovereign Wealth Funds, Edited by Joachim Coche, Ken Nyholm and Gabriel Petre, Palgrave Macmillian, New York.
Claessens, Stijn and Jerome Kreuser (2010). “Strategic Investment and Risk Management for Sovereign Wealth Funds”, BIS/ECB/WB Meeting November 2008, in Central Bank Reserves and Sovereign wealth Management, edited by Arjan B. Berkelaar, Joachim Coche, and Ken Nyholm, 2010, Palgrave MacMillan, Hampshire, England.
Claessens, Stijn and Jerome Kreuser (2007) “Strategic foreign reserves risk management: Analytical framework”, in Financial Modeling, Annals of Operations Research Volume 152: 79-113, Springer, Netherlands.
Kreuser, Jerome and Morton Lane (2006) “An Introduction to the Benefits of Optimization Models for Underwriting Portfolio Selection”, Proceedings of the 28th International Congress of Actuaries, Paris, June,
ETH Zürich Financial Crisis Observatory: A scientific platform aimed at testing and quantifying rigorously, in a systematic way and on a large scale the hypothesis that financial markets exhibit a degree of inefficiency and a potential for predictability, especially during regimes when bubbles develop.
Review: Excellent site to go for worldwide predictions of bubbles.
Lane Financial LLC: Focusing on the intersection of reinsurance and finance. They monitor the insurance and capital markets, prices and returns, and acts as an independent commentator on contemporary developments, with assessments being published on this website.
Review: Excellent site for reinsurance information and papers.
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