Advanced Analytical Models: Over 800 Models and 300 Applications from the Basel II Accord to Wall Street and Beyond

1033 Pages·2008·49.28 MB·english

by  Johnathan Mun

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Advanced
Analytical
Models
Over 800 Models and 300 Applications
from the Basel II Accord to
Wall Street and Beyond
JOHNATHAN MUN
John Wiley & Sons, Inc.
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vi
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Advanced
Analytical
Models
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Advanced
Analytical
Models
Over 800 Models and 300 Applications
from the Basel II Accord to
Wall Street and Beyond
JOHNATHAN MUN
John Wiley & Sons, Inc.
iii
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Copyright(cid:1)C 2008byJohnathanMun.Allrightsreserved.
PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey.
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LibraryofCongressCataloging-in-PublicationData:
Mun,Johnathan.
Advancedanalyticalmodels:over800modelsand300applicationsfromtheBaselII
AccordtoWallStreetandbeyond/JohnathanMun.
p.cm.—(Wileyfinanceseries)
Includesindex.
ISBN978-0-470-17921-5(cloth/dvd)
1.Finance—Mathematicalmodels. 2.Riskassessment—Mathematicalmodels.
3.Mathematicalmodels. 4.Computersimulation. I.Title.
HG106.M862008
003(cid:2).3—dc22
2007039385
PrintedintheUnitedStatesofAmerica.
10 9 8 7 6 5 4 3 2 1
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Dedicated to my wife, Penny. Without your encouragement, advice,
and support, this modeling book would never have taken off.
“Delight yourself in the Lord and He will give you the
desires of your heart.”
—Psalms 37:4 (NIV)
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Contents
Preface xv
SoftwareApplications xvii
PART1
ModelingToolkitandRiskSimulatorApplications 1
IntroductiontotheModelingToolkitSoftware 1
IntroductiontoRiskSimulator 2
RunningaMonteCarloSimulation 6
UsingForecastChartsandConfidenceIntervals 16
CorrelationsandPrecisionControl 18
TornadoandSensitivityToolsinSimulation 22
SensitivityAnalysis 29
DistributionalFitting:SingleVariableandMultipleVariables 33
BootstrapSimulation 35
HypothesisTesting 40
DataExtraction,SavingSimulationResults,and
GeneratingReports 42
RegressionandForecastingDiagnosticTool 42
StatisticalAnalysisTool 52
DistributionalAnalysisTool 54
PortfolioOptimization 56
OptimizationwithDiscreteIntegerVariables 70
Forecasting 72
1. Analytics—CentralLimitTheorem 79
2. Analytics—CentralLimitTheorem—WinningLottery
Numbers 84
3. Analytics—FlawofAverages 88
4. Analytics—MathematicalIntegrationApproximationModel 93
5. Analytics—ProjectileMotion 96
6. Analytics—RegressionDiagnostics 100
7. Analytics—ShipsintheNight 109
8. Analytics—StatisticalAnalysis 111
9. Analytics—WeightingofRatios 123
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