A range of projects are being undertaken in areas such as computational finance, term structure modelling, financial market dynamics, market microstructure, financial market modelling, numerical methods in finance and risk management. Further information on these and other projects can be found below or on the Quantitative Finance Research Centre web site.

Project Title: "Approved Pricing and Hedging Extreme Maturity Contracts"
Professor Eckhard Platen and Associate Professor Erik Schlögl
Funding: A$340,000 over years 2008-2011 (Australian Research Council Discovery Grant)

Summary:

Most Australians belong to superannuation schemes. Hence, the long term performance and risk of these investments is of particular importance to the welfare of Australia. This research will improve the life-long financial security of Australians by clearly demonstrating that many superannuation targets can be achieved with less capital than currently suggested. This project will provide new technology for enhancing the long term performance of superannuation funds, managed funds, investment banks and insurance companies, giving these Australian institutions a competitive advantage and permitting them to offer innovative financial products to mitigate extreme maturity financial risk in retirement.

Project Title: "Approved Security in Retirement: Forecasting and Managing Macro Investment Risks"
G. H. Kingston, H. J. Bateman, K. W. Clements, L. A. Fisher and Dr Susan Thorp
Funding: A$330,000 over years 2008-2010 (Australian Research Council Discovery Grant)

Summary: In his Boyer Lectures Ian Macfarlane, former RBA governor, observed that risks once borne by employers or governments are in the process of being transferred to households. Retirement incomes are a case in point. Not only do most households belong to accumulation funds which shift investment risks to members, but exposure to growth assets (equities and property) in the typical account is in the 60% - 70% range, even in the case of retirees. Our project will focus on the forecasting and management of economy-wide risks, as distinct from the equity risks or credit risks attached to investments in particular companies.

Project Title: "The Modelling and Assessment of Credit Default Risk"
Professor Carl Chiarella and Ms Thuy-Do To
Funding: A$450,000 over years 2007-2009 (Australian Research Council Discovery Grant)

Summary: This project will deliver an enhanced set of methodologies for the quantification and management of credit default risk. These outcomes will benefit researchers both in academia and in Australian financial institutions as research into credit risk has been active in recent years, due to the impending adoption by financial institutions of the Basel II accord on risk assessment. The outcomes will provide a strong academic methodology applied to credit default risk by Australian financial institutions and the Australian financial regulator. This research has the potential to enhance the competitiveness of Australia's financial sector.

Project Title: "Dynamic Asset Pricing and Portfolio Decision Rules under Heterogeneous Expectations and Adaptive Learning"
Dr Xue-Zhong He and Professor Carl Chiarella
Funding: A$400,000 over years 2007-2009 (Australian Research Council Discovery Grant)

Summary: The outcomes of this project will provide two benefits to Australian financial market researchers in academe, in industry and financial market regulators. First, a better theoretical and empirical foundation for understanding and analysing optimal portfolio decision rules in a setting that captures many realistic features of market behaviour such as heterogeneity of investor types and adaptive behaviour by market participants. Second, new tools to more effectively understand and manage portfolio risk in financial markets. Consequently Australia will have a more efficient and competitive financial system. It also has the potential to lead to the development of more finance related industries such as financial market software.

Project Title: "Large Scale Simulation Methods for Measuring Financial Performance under the Benchmark Approach"
Professor Eckhard Platen
Funding: A$285,000 over yers 2007-2009 (Australian Research Council Discovery Grant)

Summary: All working Australians are now required to belong to superannuation schemes. Hence, the measurement of financial performance safely, efficiently, and over long time horizons is of particular importance to Australia. One outcome alone of this research will be the provision of a technology to optimize the long term performance of superannuation funds. More generally, the results will allow better decision making and integrated, strategic planning for financial institutions and insurance companies. An additional outcome will be global growth for the sectors of Australia's IT industry developing innovative simulation based hardware and software, since the new simulation methods have wide applicability.

Project Title: "The Pricing and Hedging of Multi-Factor Multi-Commodity Based Swing Options"
Professor Carl Chiarella and Dr Les Clewlow
Funding: A$323,0000 over years 2007-2009 (Australian Research Council Linkage Grant)
Collaborating/Partner Organisation: Lacima Group Pty. Ltd.

Summary: The partner organisation, an Australian based company, is a leading global player in providing risk management solutions to energy corporations world-wide. The advances of the project will help it to enhance Australia's role as a provider of practical implementation of the most recent academic advances in the area of risk management technology.

Project Title: "Risk Measurement for Large Portfolios under the Benchmark Approach"
Professor Eckhard Platen and Dr A. L. Pope
Funding: $72,500 over years 2005-2008 (Australian Research Council Linkage Grant)
Partner Organisation: Group Credit, St George Bank

Summary: The measurement of risk for large portfolios, consisting of basic assets and derivatives, will play a key role in future risk management systems. Based on a new characterization of asymptotic portfolios this project proposes the development, implementation and testing of highly efficient new risk measurement methodologies suitable for portfolios with hundreds or thousands of instruments. Comparisons with standard and new simulation methods will demonstrate their superiority. The outcomes of this project will give the Australian industry and the industry partner a competitive advantage in the measurement and management of risk for large portfolios as superannuation funds or portfolios of banks.

Project Title: "Implied Distributions and Implied Asset Dynamics: Calibration and Visualisation of Models on Market Data"
Dr Erik Schlögl and Professor Tony Hall
Funding: $308,300 over years 2005-2008 (Australian Research Council Linkage Grant)
Partner Organisation: SIRCA

Summary: Global money markets represent a very complex interlinked system. Market prices of derivative financial instruments bear information about this system, information that is critical for the effective management of interest rate and currency risks in a global context. The project will develop and test methods to extract this information. It will provide an interactive environment to explore (numerically and visually) sensitivities of asset dynamics and derivatives prices to input data and modelling assumptions, thus permitting a detailed analysis of market and model risk.

Tony He
Project: "Heterogeneity, Bounded Rationality, & Mean Variance Efficiency"
Funding: A$9,624 (2008 Faculty of Business Research Grant)

Boda Kang
Project: "The Accurate & Efficient Pricing & Hedging of Multi-Dimensional American-Style Financial Derivatives Using the Meshfree Approach"
Funding: A$9,368 (2008 Faculty of Business Research Grant)