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Paul
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What are the most important papers in the field of quantitative finance?

July 20th, 2004, 7:52 pm

Thanks to adas...P
 
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Paul
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What are the most important papers in the field of quantitative finance?

July 20th, 2004, 8:03 pm

Black, F & Scholes, M 1973 The pricing of options and corporate liabilities. Journal of Political Economy 81 637-59Boyle, P 1977 Options: a Monte Carlo approach. Journal of Financial Economics 4 323-338Brace, A, Gatarek, D & Musiela, M 1997 The market model of interest rate dynamics. Mathematical Finance 7 127-154Cox, JC, Ross, S & Rubinstein M 1979 Option pricing: a simplified approach. Journal of Financial Economics 7 229-263Derman, E & Kani, I 1994 Riding on a smile. Risk magazine 7 (2) 32-39 (February)Dupire, B 1994 Pricing with a smile. Risk magazine 7 (1) 18-20 (January)(And the one by Rubinstein in Risk mag from around the same time as the two above. I don't have the exact reference.)Dumas, B, Fleming, J & Whaley, RE 1998 Implied volatility functions: empirical tests. Journal of Finance ? (To balance Dupire and Derman )Heath, D, Jarrow, R & Morton, A 1992 Bond pricing and the term structure of interest rates: a new methodology. Econometrica 60 77-105Vasicek, OA 1977 An equilibrium characterization of the term structure. Journal of Financial Economics 5 177-188The above are all very 'classical.'P
 
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mrblue
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What are the most important papers in the field of quantitative finance?

August 10th, 2004, 11:36 am

Thank you very much, do you know if some of them are available for free in the web? thank you
 
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adas
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What are the most important papers in the field of quantitative finance?

August 12th, 2004, 6:47 am

Try this site which summarizes some important papers.
 
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SPAAGG
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What are the most important papers in the field of quantitative finance?

August 13th, 2004, 11:56 am

very nice page,thanks !
 
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adas
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What are the most important papers in the field of quantitative finance?

August 26th, 2004, 4:25 am

Here are a selection of papers we were required to read in my Derivatives course: (Paul has mentioned some very important ones)Miller, Merton, 'Financial Innovation: achievements and prospects', in The new corporate finance: where theory meets practice, ed DH Chew Jr 3rd McGraw HillMerton, Robert C., "Theory of rational Option pricing", Bell Journal of Economics and Management Science, 1973, (4), 141-83Black, F., 1992, "The Holes in Black Scholes" in From Black Scholes to Black Holes:New Frontiers in Options, Risk Magazine pp.51-56Leland, H.E., 1996, "Options and Expectations", Journal of Portfolio Management Special Issue, pp.43-51Fleming, J., Kirby, C. and B. Ostdiek, 2001, "The Economic value of volatility timing", Journal of Finance, 56 (1), pp. 329-352Rubinstein, M., July 1994, "Implied Binomial Trees", Journal of Financemore to come...
 
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adas
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What are the most important papers in the field of quantitative finance?

October 1st, 2004, 10:18 pm

Update:Hudson, M., 1992, "The Value in Going Out" in From Black-Scholes to Black Holes: New Frontiers in Options, Risk Magazine Ltd., London, pp. 183-186Bakshi, G Cao, C and Z Chen, 1997, "Empirical performance of alternative option pricing models", Journal of Finance, 52 (5), pp. 2003-49Babsiri, M and G. Noel, 1998, "Simulating path dependent options: a new approach", Journal of Derivatives, winter, pp 65-83Kritzman, M., 1993, "What Practitioners Need to Know about Monte Carlo Simulation" Financial Analysts Journals, 49 (2), pp. 17-20
 
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SU2
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What are the most important papers in the field of quantitative finance?

October 2nd, 2004, 2:33 pm

The two papersE. Fournie, J.M. Lasry, J. Lebuchoux, P.L. Lions and N. Touzi, An application of Malliavin calculus to Monte Carlo methods in finance, (1999)E. Fournie, J.M Lasry, J. Lebuchoux and P.L. Lions, Applications of Malliavin Calculus to Monte Carlo Methods in Finance II, (2001)opened a door of applying Malliavin calculus to numerical finance. Electronic copies of these papers can be easily obtained by simply googling it.
Last edited by SU2 on October 1st, 2004, 10:00 pm, edited 1 time in total.
 
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Munchkin
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What are the most important papers in the field of quantitative finance?

November 3rd, 2004, 6:36 pm

I also suggest this as a great source for a reading list:Suresh M. Sundaresan 2000, "Continuous-Time Methods in Finance: A Review and an Assessment", The Journal of Finance, Vol. 55, No. 4
 
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NicolaR
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What are the most important papers in the field of quantitative finance?

May 5th, 2006, 2:19 pm

I suggest this old-school one : Bachelier, L.Théorie de la spéculation. Annales Scientifiques de l'École Normale Supérieure Sér. 3, 17 (1900), p. 21-86 And :Berkowitz, Jeremy, "Getting the Right Option Price with the Wrong Model" (October 8, 2001). Available at SSRN: http://ssrn.com/abstract=286816 or DOI: 10.2139/ssrn.286816Hull, J. and W. Suo (2000), \A Methodology for Assessing Model risk and its Application to the Implied Volatility Function Model," Manuscript, Rotman School of Management, University of Toronto
 
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bskilton81
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What are the most important papers in the field of quantitative finance?

May 19th, 2006, 11:43 am

Obvious:Markowitz, Harry M. (1952). Portfolio Selection.
 
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Collector
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What are the most important papers in the field of quantitative finance?

May 26th, 2006, 2:51 pm

I agree with "most" of the papers mentioned, but we have forgot a lot of papers...some of them here:what seems obvious today, is often based on a long process of discoveries. Today’s knowledge often goes back to ancient wisdom, some times thousands of years old. Of course the last 50 years there has been enormous progress in quantitative finance, but I would like add some of the early attempts and discoveries:BINOMIAL TRIANGLE (and "most" of the probability theory needed for derivatives valuation: DBhagabati Sutra published 300 years before the birth of Christ And in particular Yanghui (1261) (China)Re-discoverd by the barbarians of Europe around 1600EARLY ATTEMPTS TO MEASURING PRICE RISK/VOLATILITY/PRICE FLUCTAIONS1764 G. R. Carli: Del Valore e della Proporzione de' Metalli Monetati con i generi in Italia prima delle Scoperte dell' Indie col confronto del Valore e della Proporzione de' Tempi nostri1798 Sir George Schuckburg-Evelyn "An account of some endeavors to ascertain a standard weight and measure"1915/1921 Time dependent price fluctaions Mitchell "The Making and Using of Index Numbers” FAT TAILS:1915 (and 1921): First to detect fat tails in financial time series (referred to by Mandelbrot 1962): Wesley C. Mitchell “The Making and Using of Index Numbers,” Introduction to Index Numbers and Wholesale Prices in the United States and Foreign Countries (published in 1915 as Bulletin No. 173 of the U.S. Burea of Labor Statistics, reprinted in 1921 as Bulletin No. 284). I got hold of this document now, Wesley C. Mitchell is not only the first to detect fat tails and high peaked distributions he is also the first to empirically describe time varying risk ("volatility").Drawing modern-looking histogram based on 5578 observations without a computer or even calculator, I bet Mitchell had a lot of beautiful secretaries. His time varying fluctuation(volatility)/distribution fold out chart is just beyond what we do today, it basically gives rough indication of distribution over time...okay so this guy has observed something like time-varying-risk and fat tailed high peaked histogram even comparing to normal distribution back in 1915.... Why is he so little referred by quant finance people? He can be seen as the first to give indications of time varying-risk resulting in fat tails!! He mainly focus on the high peak and not much on his observed fat tails...1926 Maurice Oliver "Les Nombres Indices de la Variation des Prix" According to Mandelbrot 1962 this is first paper to present unquestionalbel proof of fat tailed distribution. Unfortunatley I have not been able to get hold of this paper.1927 Frederick Mills "The Behaviour of Prices" 1959 Osborne: detects fat tails, but ignores them and stick to normal distributed returns1960 Sprenkle Dr thesis Yale first to reject log-normal and normal distribution based on calculating skewness and kurtosis for various stocks, but still stick to log-normal as he not can see any other distribution immediately applicable for option valuation...but he clearly indicates distribution with higher kurtosis would be preferable. Thesis re-published in 1964 Cootner. Sprenkle first to extend Bachelier's work to log-normal, first to discuss fat tails in relation to options... This even after skipping crash of 1929, Sprenkle calculates skewness and kurtosis until just before crash and then after crash, including crash he must of course have known he needed much higher kurtosis and/or skewness... I guess we could ask him, he is still a finance professor I think ....?1960 Larson: talks about fat tails and 8 and 9 sigma extrem outliers1961 Alexander: Takes fat tails seriously!1962 Mandelbrot one of the first to really push for looking at data, and develop models than fit data rather than start with model...he focus on fat tails in particular.Fat tails are one of the most important topics in finance!! The early discoveries have got little credit! Thosand and thousands of papers are written related to fat tails later on, time varying vol (theoretical introduced by Rosenberg), stochatic vol, local vol, jumps....risk managment....it is all about fat tails!ARBITRAGE PRINCIPLE Naturally arbitrage between same commodities traded various places must have been understood in ancient times.... here concentrating on derivatives: Early understanding of arbitrage principle in forwards:1923 John Maynard Keynes., A Tract on Monetary Reform, (2000 re-print Prometheus Books: Amherst). Somewhat diffuse1944-45 Blau, G. “Some Aspects of the Theory of Futures Trading.” The Review of Economic Studies XII , 1-30 Very clear!1900/1961 Put-Call Parity: Diffusly indicated by Bachelier 1900: see his drawings of p&l where long future agains short call clearly looks like put. In more detail by Kruizenga 1956 and "Fully" understood by Anthony M. Reinach 1961: including interest rate effect and even commision and many details "The Nature of Puts & Calls", later described again by Stoll 1969What is expected lifetime for a great paper? Even languages disappear over time. Don't think computers makes big difference, what do you think will survive the longest, all the formulas and ideas written in papers, books, saved on HD, CDs, DVD's, or the single formula that I have carved into a stone wall !! Year 3150: Mr. X "The Arbitrage Principle" (re-discovered after all knowlege got lost in major catastroph at earth sometime between 2000 and 3000) Mr. X an Archeologist finds formula inscription carved on stone wall in Norwegian forest, you can call that the ultimate survival ship bias in quantitative finance!!! They will think of us as barbarians.
Last edited by Collector on June 25th, 2006, 10:00 pm, edited 1 time in total.
 
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seanster
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What are the most important papers in the field of quantitative finance?

November 3rd, 2008, 1:22 pm

B-S => Black and Scholes worldderman/kani/dupire => loc vol calibrationmercurio => vanna volgaHagan =>sabrheston => stoch volwystup => fxrebonato => for a good rounduptaleb => dynamic hedging
 
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cosmologist
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What are the most important papers in the field of quantitative finance?

November 7th, 2008, 10:45 am

QuoteOriginally posted by: SU2The two papersE. Fournie, J.M. Lasry, J. Lebuchoux, P.L. Lions and N. Touzi, An application of Malliavin calculus to Monte Carlo methods in finance, (1999)E. Fournie, J.M Lasry, J. Lebuchoux and P.L. Lions, Applications of Malliavin Calculus to Monte Carlo Methods in Finance II, (2001)opened a door of applying Malliavin calculus to numerical finance. Electronic copies of these papers can be easily obtained by simply googling it.The papers are so O P A Q UE that i would suggest to avoid them. Beauty of a good paper lies in its readability.cheers