Fourth Financial Mathematics Festival 22 — 23 February 2002 Dirac Science Library, 4th Floor Department of Mathematics The Florida State University

SCHEDULE OF EVENTS February 22—23

Friday, 22 February 2001: 3:30-6:00 p.m.

      3:00 p.m., Dirac Science Library, 4th Floor

The Black-Scholes Equation in a Discrete Setting

Greg Anderson, Consultant, Fixed Income Research, Barra, Inc.

Many accounts of the Black-Scholes analysis start with an expository account of a discrete state and time framework in which the reader is firmly cautioned that the economically relevant measure on state space is usually not uniform. Typically the discrete setting is then abandoned in favor of the "real" model, geometric Brownian motion, and the Black-Scholes equation makes its appearance. In practice, this partial differential equation is solved numerically using a finite difference scheme, which bears an uncanny resemblance to the expository discrete setting, with the striking exception that all branchings are treated equally. We aim to resolve the apparent contradiction and provide a discrete perspective on the Black-Scholes equation in the process.

Reception

Cross-Sectional Stock Selection Models

Edward Qian, Vice President, Senior Quantitative Analyst, Putnam Investments

One of the primary tools used by active equity portfolio managers and equity hedge fund managers is cross-sectional model. In contrast to time series model, the cross-sectional model does not aim to predict the return of individual stocks. Rather, it aims to predict the rank of relative returns of all stocks. Three factors determine the performance of a cross-sectional model: correlation between model forecasts and stock returns, dispersion of the forecasts and dispersion of the stock returns. We present a simple mathematical framework of cross-sectional model using the three factors and illustrate it with some practical examples.

Saturday, 23 February 2001      

      10:00 a.m., Dirac Science Library, 4th Floor

Bagels and Coffee

Jobs!

Employment Opportunities

Jack Madden, Planning, Policy & Program Development Manager, Florida State Board of Administration

Changes brought about by shifts to Defined Contribution retirement programs; internship and employment opportunities in government and specifically at the State Board of Administration.

Panel Discussion and Audience Questions

Dr. Anderson, Dr. Qian, Mr. Madden

The Steering Committee is composed of Professors Ted Baker, Bettye Anne Case (Chair), Jim Cobbs, Myles Hollander, David Kopriva, Patrick Maroney, Don Nast, and Craig Nolder.

Financial Sector Advisors are Larry Abele (Deutsche Asset Management), David Barge (Florida Power and Light), Lisa Goldberg (Barra, Inc.), Steven Perfect (Florida Power and Light), Edward Qian (Putnam Investments), Ray Song (Branch Banking and Trust), Jay Webb (UBS Warburg Energy), and Anjun Zhou (State Street Global Advisors).

Cooperating Departments are: Computer Science, Economics, Finance, Mathematics, Risk Management and Statistics. FSU faculty members from six departments in three colleges developed this program and guide the students. A group of FSU graduates and others who work in the financial industry also advise the program which is resident in the Department of Mathematics of the College of Arts and Sciences. Graduate study in Financial Mathematics and a listing of participating faculty is described in the Guide to Financial Mathematics at Florida State University