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NETWORK MODELS in FINANCE An insightful exploration of the theory and application of networks as applied to investment management Network Models in Finance: Expanding the Tools for Portfolio and Risk Management is a singularly incisive and unique discussion of networks and graph theory as applied to the financial and investment markets. Researchers and authors Gueorgui Konstantinov and Frank Fabozzi walk you through a comprehensive overview of networks in investment management, providing deep insight into their implementation in portfolio and risk management. You'll discover how to construct diversified and risk-optimized portfolios by linking the price and return movements of different asset classes and factors. You'll also find out how to better manage risk by properly understanding systematic, counterparty, and systemic risk, and by monitoring changes in the financial system that may indicate a coming financial crisis.
Network Models in Finance delivers practical examples of a wide variety of financial data that can be used to visualize, describe, and investigate markets in an entirely new way, and explains the interactions and causal relationships that operate within a network-based framework. This book is a must-read for investors, asset managers, and other finance practitioners with an interest in a largely underexplored area of investing.
List of contents
Preface ix
Acknowledgments xv
About the Authors xvii
Part One Chapter 1 Introduction 3
Chapter 2 The Basic Structure of a Network 29
Chapter 3 Network Properties 45
Chapter 4 Network Centrality Metrics 71
Part Two Chapter 5 Network Modeling 95
Chapter 6 Foundations for Building Portfolio Networks - Link Prediction and Association Models 117
Chapter 7 Foundations for Building Portfolio Networks - Statistical and Econometric Models 141
Chapter 8 Building Portfolio Networks - Probabilistic Models 163
Chapter 9 Network Processes in Asset Management 181
Chapter 10 Portfolio Allocation With Networks 227
Part Three Chapter 11 Systematic and Systemic Risk, Spillover, and Contagion 261
Chapter 12 Networks in Risk Management 277
References 313
Index 327
About the author
GUEORGUI S. KONSTANTINOV, PHD, has over 17 years' experience in portfolio management, managing global bond portfolios and currencies for institutional investors and pension funds. He is an advisory board member of the
Journal of Portfolio Management and the coauthor of
Quantitative Global Bond Portfolio Management.
FRANK J. FABOZZI, PHD, is Professor of Practice at John Hopkins University's Carey Business School. He has authored over 100 books and edited
The Handbook of Fixed Income Securities and
The Handbook of Mortgage-Backed Securities. He holds the CFA and CPA professional designations.
