The Mathematics of Financial Modelingand Investment Management

Index Page 768 Wednesday, February 4, 2004 1:13 PM

768 Index

Limit random variable, conver-

gence, 189–190

Limits, 102–103

Lindskog, Filip, 189, 329

Linear conditional factor mod-

els, 531

Linear differential equation, 247–

249, 621

Linear equations

homogeneous system, 409

systems, 149–150

theorem, 150

Linear independence/rank, 151

Linear infinite moving average

representation, 305

Linear models. See Financial time

series

Linear moving average nonsta-

tionary models, 295–296

Linear objective function, 206–

207

Linear ODE, 21

Linear programming (LP), 201,

206–208

Linear regression, 197–199, 328

model, 530

Linear stochastic equations, 278

Linear utility function, 489

Lintner, John, 75, 86–87, 334,

477, 512

Lippi, M., 334

Lipschitz condition, 242

Liquidation firm, 706

Liquidity, 22. See also Assets

premium, 610, 617

theory, 613, 617. See also

Term structure

Litterman, Robert, 399

Litzenberger, Robert, 520

Lo, Andrew W., 327, 344, 345,

546, 574

Local expectations theory, 616

Location-scale dependent fam-

ily, 368

Loftus, John S., 552

Logarithmic utility function, 489

Log-gamma distribution, 366

Log-likelihood computation, 321

Lognormal distribution, 531

Lognormal model, usage, 692

Lognormally distributed variable,

539

Log-prices, 538

London Interbank Offered Rate

(LIBOR), 608–610

forward rate curve, 611

interest rate. See Forward

LIBOR interest rate

one-month, 53

one-year, 54

spot rate curve, 611

three-month, 609

usage, 70

Long-memory fractional mod-

els, 346

Long-short equity portfolios, 545

Long-short portfolios, 340

Longstaff, Francis, 695

Lookback option, 423

Lorenz, Edward, 257

Loss analysis, risk, 507

Loss probability, 508

Louveaux, F., 202

Lower Riemann sum, 127

Lower triangular matrix, 148

Low-risk passive portfolio strat-

egies, 42

Lucas, A., 344

Lundberg, Filip, 75, 80–81

Lynch, Peter, 567

M3. See Monetary mass

MacKinley, A. Craig, 327, 344,

345, 546, 574

Maclaurin expansion, f126

Maclaurin power series, 122

Macroeconomic econometric

models, 259

Macroeconomic effect, 722

Macroeconomic factors, identi-

fication, 436

Macroeconomic theory, 532

Maddala, G.S., 543

Maintenance margin, 50, 58

requirements, 58

Malevergne, Y., 331, 492

Mandelbrot, Benoit, 231, 258, 389

Mantegna, R.N., 390

Marcus, L., 214

Margin

call, receiving, 50

requirement, 59, 65. See also

Initial margin requirement

transactions, 49–50

Marginal density, 176, 192

Marginal distribution function,

176–178

Market. See Complete markets;

Factor; Financial mar-

kets; Product market;

Thin market

capitalization, 3, 94–95. See

also Total market capi-

talization

completeness, 404, 738–744

economics, 742–744

mathematics, 739–742

debt value, 689

impact costs, 33, 63

index, 4

contrast. See Bonds

makers, restrictions, 28, 83

making, 23

model, 524

order, 48

organizational structure, 25

overreaction, 572–573

participants, overview, 21,

34–45

portfolio, 86, 481, 525

price efficiency, 7, 31–32

risk, 86, 745–746

reward per unit, 482

segmentation theory, 613, 618

thickness, 31

timing costs, 33

value. See Assets; Liabilities

Market-clearing prices, 29

Market-neutral strategies, 575–

577

Marketplace price efficiency, 7

Markov chain, 705

Markov coefficients, 293–294,

304–305

Markov models, 423

Markov process. See Continu-

ous-time Markov process

Markov switching

method, 547

models, 286, 347–348, 379, 384

Markov switching Hamilton

models, 496

Markov-switching VAR, 548

Markowitz, Harry M., 75, 81–

83, 201, 471, 477, 494,

497, 500, 503–506, 524,

532, 557, 586. See also

Mean-variance analysis

(ed.), 494, 497, 500, 503–506,

524, 532, 557, 558, 582,

583, 586, 588, 590, 651

Markowitz efficient frontier, 474,

479. See also Ex ante
     Markowitz efficient frontier
     Markowitz efficient portfolios,
     474
     Marsh, T., 377
     Martellini, Lionel, 632, 633
     Martingale, 186
     conditions, system, 432
     measures. See Equivalent
     Martingale measures
     Marxist economics, 78
     Mateev, P., 389
     Mathematical programming
     problem, 201
     Matlab (software), 487
     Matrices, 141, 144–145. See
     also Covariance; Diago-
     nals; Hankel matrices;
     Identity matrix; Lower
     triangular matrix; nxm
     matrix; Random matri-
     ces; Square matrices;
     Transition matrix; Upper
     triangular matrix
     adjoint, 159–160
     algebra, 141, 208
     dimensions, 145
     elements, 144–145
     notation, 207