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www.math.umn.edu/mcfam/distinguished-lectures
Distinguished Lecture Series:Dr. Peter Carr
Minnesota Center for Financial and Actuarial Mathematics
Friday,�October�19,�2012Tea�at�4:45�p.m.,�Vincent�Hall�120Lecture�at�5:30�p.m.,�Vincent�Hall�16Twin�Cities�Campus,�East�Bank
The�risk�return�relation�is�a�staple�of�modern�finance.�When�risk�is�measured�by�volatility,�it�is�well�known�that�option�prices�convey�risk.�In�a�parametric�Markovian�setting,�risk-neutral�transition�probabilities�can�also�be�determined�from�option�prices.�Recently,�Ross�has�shown�that�real-world�transition�probabilities�of�a�Markovian�state�variable�can�be�recovered�from�its�risk-neutral�transition�probabilities�along�with�a�restriction�on�preferences.�In�this�paper,�we�show�how�to�recover�realworld�transition�probabilities�in�a�diffusion�context�in�a�preference-free�manner.�Our�approach�is�instead�based�on�restricting�the�form�and�dynamics�of�the�numeraire�portfolio.�(Joint�work�with�Jiming�Yu.)�
Risk,�Return,�and�Ross�Recovery
Biography
Dr.�Peter�Carr�is�a�Managing�Director�at�Morgan�Stanley�with�15�years�of�experience�in�the�derivatives�industry.�He�was�also�a�finance�professor�for�8�years�at�Cornell�University,�after�obtaining�his�PhD�from�UCLA�in�1989.�He�is�presently�the�Executive�Director�of�the�Math�Finance�program�at�NYU's�Courant�Institute,�the�Treasurer�of�the�Bachelier�Finance�Society,�and�a�trustee�for�the�Museum�of�Mathematics�in�New�York.�He�has�over�70�publications�in�academic�and�industry-oriented�journals�and�serves�as�an�associate�editor�for�8�journals�related�to�mathematical�finance.�He�was�selected�as�Quant�of�the�Year�by�Risk�Magazine�in�2003�and�shared�in�the�ISA�Medal�for�Science�in�2008.�The�International�Association�of�Financial�Engineers�(IAFE)�and�Sungard�selected�Dr.�Carr�as�its�2010�Financial�Engineer�of�the�Year.