Efficient Markets, Risk Premia and Market Anomalies

This area is concerned with how markets work, how prices form, how one hedges against risk, robust methods for protecting returns against risk, and opportunities in the markets for making returns. OMI has distinguished researchers from the financial economics perspective who look at evidence from commodity markets on the limits to arbitrage and hedging, the international transmission of funding shocks, and the performance of hedge funds etc. But we also have researchers from a mathematical perspective focus on developing a robust approach to Mathematical Finance, which does not start with an a priori model but rather with the information available in the markets.

The perspective has changed rapidly over the last few years.  Pre-crisis finance often assumed that financial markets are efficient in their pricing risk management of the traded securities. The credit crunch exposed how much this hypothesis was far from the reality. It also exposed the fact that the traditional methods used for asset allocation suffer if the diversification argument on which they relayed is no longer valid. Such market anomalies are likely to be representative of the future patterns in markets behaviour. 

An important OMI focus in this area is to understand what the future paradigm of “mathematical finance” really is. What can be saved and what have to be modified to more adequately represent the changed reality of today.  

 
Institute members connected with Efficient Markets, Risk Premia and Market Anomalies:
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    Samuel Cohen
    University Research Lecturer in Mathematical Finance at the Mathematical Institute, University of Oxford
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    Doyne Farmer
    Professor of MathematicsCo-Director, Complexity Economics, The Institute for New Economic Thinking at the Oxford-Martin School
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    Dunhong Jin
    DPhil Student in Financal Economics
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    Robert Kosowski
    Associate Professor of Finance, Imperial College London
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    Mathias Kruttli
    Economist at the Federal Reserve Board of Governors
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    Gechun Liang
    Lecturer in Financial Mathematics at the Department of Mathematics, King's College London
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    Terry Lyons
    Wallis Professor of Mathematics, University of Oxford
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    Patrick McSharry
    Head of Catastrophe Risk Financing, Smith School, University of Oxford
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    Lawrence Middleton
    DPhil Student, Statistics
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    Michael Monoyios
    Associate Professor in Financial Mathematics, Mathematical Institute, University of Oxford
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    Katrien Morbee
    DPhil student in law and finance
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    Marek Musiela
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    Matthias Qian
    DPhil Student in Economics
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    Johannes Ruf
    Senior Lecturer in Financial Mathematics, UCL
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    Frederic Schweikhard
    Senior Research Fellow
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    John Thanassoulis
    Professor of Financial Economics at Warwick University Business School
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    Jerry Tsai
    University Lecturer in Economics
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    Zoe Tsesmelidakis
    Senior Research Fellow
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    Sumudu Watugala
    Assistant Professor of Finance, Dyson School of Applied Economics & Managment
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    James Wolter
    Associate Professor in Financial Econometrics
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    Thaleia Zariphopoulou
    Chair in Mathematics, V. F. Neuhaus Centennial Professor, The Unviersity of Texas at Austin
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    Peter Zimmerman
    DPhil Student, Financial Economics