First Financial Mathematics Festival 19 — 20 March 1999 Dirac Science Library, 4th Floor Department of Mathematics The Florida State University

3:00 p.m.

4:30 p.m.

Edward Qian PhD FSU '93 Vice-President, Putnam Investments, Boston Schwarz Inequality and Sharpe Ratio Many investment products nowadays are actively managed against broad market indices. It is not an easy task to beat the market indices. The finance sections of newspapers are full of stories about a high percentage of US equity mutual funds under-performing S&P 500 index. TAA (Tactical Asset Allocation) is one quantitative technique designed for active fund managers to beat the market. The basic premise is to forecast returns for various segments of the market and then to combine the segments in ways that are different from the index to obtain a higher return.       In this talk, I will discuss various aspects of TAA in mathematical terms, from performance measure (Sharpe ratio), to portfolio construction (mean-variance optimization). Many results are analytically tractable in terms of multivariate statistics. Curiously, Schwarz inequality appears in our analysis as we discuss a portfolio strategy that optimizes TAA's Sharpe ratio.

Jay Webb PhD FSU '93 Director, Energy Trading Systems, Enron Capital & Trade Resources, Houston Value at Risk - An Overview       Value at Risk has become an increasingly important metric for risk analysis and control within investment banks and other financial institutions. There is, however, no clearly defined recipe for its implementation. In particular, the appropriate implementation will depend on the size of the institution's portfolio and the complexity of the financial instruments contained within it. In all cases, the problem presents many interesting mathematical, statistical and computational challenges.       This presentation will introduce Value at Risk, discuss why it is a valuable tool in portfolio analysis and address some of the complex business and technical issues it raises.

Professors James Ang (Finance) and Paul Beaumont (Economics) will join Jay Webb andEdward Qian for a discussion about opportunities and preparation needed for those careers.

Cooperating Departments are: Economics, Finance, Mathematics, Risk Management and Statistics.

Graduate study in Financial Mathematics and a listing of the faculty is described in the Guide to Financial Mathematics at Florida State University

The Steering Committee is composed of Professors Paul Beaumont, Bettye Anne Case (Chair), David Kopriva, Ian McKeague, Don Nast and Craig Nolder.