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quantitative methods in finance terry j. watsham and keith. methods in finance watsham pdf - wordpress - quantitative methods in finance watsham it is. Preface. Acknowledgements. 1 Interest rates and asset returns. Introduction. The economic theory of interest. The time value of money. Spot rates, forward rates. quantitative methods in finance terry j. watsham and keith. visit our home page on wiley quantitative methods in finance watsham pdf - wordpress.
He should be an astute student of the markets, familiar with the vast array of modern financial instruments and market mechanisms, and of the econometric properties of prices and returns in these markets. If he works in the financial industry, he should also be well versed in regulations and understand how they affect his firm. That sets the academic syllabus for the profession.
Carol takes the reader step by step through all these topics, from basic definitions and principles to advanced problems and solution methods. She uses a clear language, realistic illustrations with recent market data, consistent notation throughout all chapters, and provides a huge range of worked-out exercises on Excel spreadsheets, some of which demonstrate 22 xx Foreword analytical tools only available in the best commercial software packages.
Many chapters on advanced subjects such as GARCH models, copulas, quantile regressions, portfolio theory, options and volatility surfaces are as informative as and easier to understand than entire books devoted to these subjects.
Indeed, this is the first series of books entirely dedicated to the discipline of market risk analysis written by one person, and a very good teacher at that.
A profession, however, is more than an academic discipline; it is an activity that fulfils some societal needs, that provides solutions in the face of evolving challenges, that calls for a special code of conduct; it is something one can aspire to.
Does market risk management face such challenges? Can it achieve significant economic benefits? As market economies grow, more ordinary people of all ages with different needs and risk appetites have financial assets to manage and borrowings to control.
What kind of mortgages should they take? What provisions should they make for their pensions? The range of investment products offered to them has widened far beyond the traditional cash, bond and equity classes to include actively managed funds traditional or hedge funds , private equity, real estate investment trusts, structured products and derivative products facilitating the trading of more exotic risks commodities, credit risks, volatilities and correlations, weather, carbon emissions, etc.
Managing personal finances is largely about managing market risks. How well educated are we to do that? Corporates have also become more exposed to market risks. Beyond the traditional exposure to interest rate fluctuations, most corporates are now exposed to foreign exchange risks and commodity risks because of globalization. A company may produce and sell exclusively in its domestic market and yet be exposed to currency fluctuations because of foreign competition.
Risks that can be hedged effectively by shareholders, if they wish, do not have to be hedged in-house. But hedging some risks in-house may bring benefits e. Indeed, over the last generation, there has been a marked increase in the size of market risks handled by banks in comparison to a reduction in the size of their credit risks.
Since the s, banks have provided products e. They have also built up arbitrage and proprietary trading books to profit from perceived market anomalies and take advantage of their market views. More recently, banks have started to manage credit risks actively by transferring them to the capital markets instead of warehousing them.
Bonds are replacing loans, mortgages and other loans are securitized, and many of the remaining credit risks can now be covered with credit default swaps. Thus credit risks are being converted into market risks. The rapid development of capital markets and, in particular, of derivative products bears witness to these changes.
These derivative markets are zero-sum games; they are all about market risk management hedging, arbitrage and speculation. This does not mean, however, that all market risk management problems have been resolved.
We may have developed the means and the techniques, but we do not necessarily 23 Foreword xxi understand how to address the problems. Regulators and other experts setting standards and policies are particularly concerned with several fundamental issues.
To name a few: 1. How do we decide what market risks should be assessed and over what time horizons? For example, should the loan books of banks or long-term liabilities of pension funds be marked to market, or should we not be concerned with pricing things that will not be traded in the near future?
We think there is no general answer to this question about the most appropriate description of risks. The descriptions must be adapted to specific management problems. In what contexts should market risks be assessed? Thus, what is more risky, fixed or floating rate financing? Answers to such questions are often dictated by accounting standards or other conventions that must be followed and therefore take on economic significance. But the adequacy of standards must be regularly reassessed.
To wit, the development of International Accounting Standards favouring mark-to-market and hedge accounting where possible whereby offsetting risks can be reported together.
To what extent should risk assessments be objective? Modern regulations of financial firms Basel II Amendment, have been a major driver in the development of risk assessment methods. Regulators naturally want a level playing field and objective rules. This reinforces a natural tendency to assess risks purely on the basis of statistical evidence and to neglect personal, forward-looking views.
Thus one speaks too often about risk measurements as if risks were physical objects instead of risk assessments indicating that risks are potentialities that can only be guessed by making a number of assumptions i. Regulators try to compensate for this tendency by asking risk managers to draw scenarios and to stress-test their models. There are many other fundamental issues to be debated, such as the natural tendency to focus on micro risk management because it is easy rather than to integrate all significant risks and to consider their global effect because that is more difficult.
In particular, the assessment and control of systemic risks by supervisory authorities is still in its infancy. But I would like to conclude by calling attention to a particular danger faced by a nascent market risk management profession, that of separating risks from returns and focusing on downside-risk limits. It is central to the ethics of risk managers to be independent and to act with integrity.
Thus risk managers should not be under the direct control of line managers of profit centres and they should be well remunerated independently of company results. But in some firms this is also understood as denying risk managers access to profit information. I remember a risk commission that had to approve or reject projects but, for internal political reasons, could not have any information about their expected profitability. For decades, credit officers in most banks operated under such constraints: they were supposed to accept or reject deals a priori, without knowledge of their pricing.
Times have changed. We understand now, at least in principle, that the essence of risk management is not simply to reduce or control risks but to achieve an optimal balance between risks and returns. Yet, whether for organizational reasons or out of ignorance, risk management is often confined to setting and enforcing risk limits. Most firms, especially financial firms, claim to have well-thought-out risk management policies, but few actually state trade-offs between risks and returns.
Attention to risk limits may be unwittingly reinforced by regulators. Of course it is not the role of the supervisory authorities to suggest risk return trade-offs; so supervisors impose risk limits, such as value at risk relative to capital, to ensure safety and 24 xxii Foreword fair competition in the financial industry. But a regulatory limit implies severe penalties if breached, and thus a probabilistic constraint acquires an economic value.
Banks must therefore pay attention to the uncertainty in their value-at-risk estimates. The effect would be rather perverse if banks ended up paying more attention to the probability of a probability than to their entire return distribution.
With Market Risk Analysis readers will learn to understand these long-term problems in a realistic context. Carol is an academic with a strong applied interest. She has helped to design the curriculum for the Professional Risk Managers International Association PRMIA qualifications, to set the standards for their professional qualifications, and she maintains numerous contacts with the financial industry through consulting and seminars.
In Market Risk Analysis theoretical developments may be more rigorous and reach a more advanced level than in many other books, but they always lead to practical applications with numerous examples in interactive Excel spreadsheets. In summary, if there is any good reason for not treating market risk management as a separate discipline, it is that market risk management should be the business of all decision makers involved in finance, with primary responsibilities on the shoulders of the most senior managers and board members.
However, there is so much to be learnt and so much to be further researched on this subject that it is proper for professional people to specialize in it. These four volumes will fulfil most of their needs. They only have to remember that, to be effective, they have to be good communicators and ensure that their assessments are properly integrated in their firm s decision-making process. Its development began during the s, spurred on by the first Basel Accord, between the G10 countries, which covered the regulation of banking risk.
Over the past 30 years banks have begun to understand the risks they take, and substantial progress has been made, particularly in the area of market risks. Here the availability of market data and the incentive to reduce regulatory capital charges through proper assessment of risks has provided a catalyst to the development of market risk management software. Nowadays this software is used not only by banks, but also by asset managers, hedge funds, insurance firms and corporate treasurers.
Understanding market risk is the first step towards managing market risk. Yet, despite the progress that has been made over the last 30 years, there is still a long way to go before even the major banks and other large financial institutions will really know their risks.
At the time of writing there is a substantial barrier to progress in the profession, which is the refusal by many to acknowledge just how mathematical a subject risk management really is.
Asset management is an older discipline than financial risk management, yet it remains at a less advanced stage of quantitative development. Unfortunately the terms equity analyst, bond analyst and more generally financial analyst are something of a misnomer, since little analysis in the mathematical sense is required for these roles. I discovered this to my cost when I took a position as a bond analyst after completing a postdoctoral fellowship in algebraic number theory.
One reason for the lack of rigorous quantitative analysis amongst asset managers is that, traditionally, managers were restricted to investing in cash equities or bonds, which are relatively simple to analyse compared with swaps, options and other derivatives. Also regulators have set few barriers to entry. Almost anyone can set up an asset management company or hedge fund, irrespective of their quantitative background, and risk-based capital requirements are not imposed.
Instead the risks are borne by the investors, not the asset manager or hedge fund. The duty of the fund manager is to be able to describe the risks to their investors accurately. Fund managers have been sued for not doing this properly.
But a legal threat has less impact on good practice than the global regulatory rules that are imposed on banks, and this is why risk management in banking has developed faster than it has in asset management.
Still, there is a very long way to go in both professions before a firm could claim that it has achieved best practice in market risk assessment, despite the claims that are currently made.
At the time of writing there is a huge demand for properly qualified financial risk managers and asset managers, and this book represents the first step towards such qualification. With this book readers will master the basics of the mathematical subjects that lay the foundations 26 xxiv Preface for financial risk management and asset management.
Readers will fall into two categories. The first category contains those who have been working in the financial profession, during which time they will have gained some knowledge of markets and instruments. But they will not progress to risk management, except at a very superficial level, unless they understand the topics in this book. The second category contains those readers with a grounding in mathematics, such as a university degree in a quantitative discipline.
Readers will be introduced to financial concepts through mathematical applications, so they will be able to identify which parts of mathematics are relevant to solving problems in finance, as well as learning the basics of financial analysis in the mathematical sense and how to apply their skills to particular problems in financial risk management and asset management. The level should be accessible to anyone with a moderate understanding of mathematics at the high school level, and no prior knowledge of finance is necessary.
In the following oriented approach along with inancial functions paragraphs the generic FIS will be presented for the increase of inancial performance is a pre- along with the literature review concerning its requisite for the strategic survival. Computational components. Speciic attention will be given on intelligence employed in those inancial models the basic quantitative processing techniques which includes techniques of advanced statistics mainly are based on statistics, artiicial intelligence and time series with exceptions, like discriminant neural networks.
Finally, an attempt will be made analysis for the credit risk evaluation , simulation to integrate the generic FIS within the strategic of stochastic processes, and artiicial and neural alignment model for future research. Moreover, techniques Financial information systems FIS are usually of artiicial intelligence and neural networks found as a subtopic of the accounting information include case base reasoning, genetic algorithms, systems, but they must be separated due to dif- genetic programming, heuristic methods of linear ferences in principles and practices.
Especially, programming and neural optimization, and so the quantitative character of inance demands a forth. Machine learning techniques are applied completely different approach than that of the in portfolio optimization and derivatives pricing. Risk management and work close but each is separate from the other in inancial forecasting make use of neural networks scope and practice.
The black box of FIS includes and expert systems advances as well as advanced quantitative analysis, fundamental analysis, and statistics and operational research. In the coming technical and ixed income analysis. Stochastic sections a more detailed analysis will be presented. From the basic where extensive literature can be found. Financial outputs of accounting information systems, expost information systems use various quantitative tech- budgeting analysis forecast inancial statements niques that are employed to model credit ratings for the coming years pro-forma.
Technical analy- and sovereign ratings, to evaluate credit risk, to sis is trying to describe and forecast the movement forecast failure, bankruptcy and inancial risk, to of the prices on the markets using techniques such model stock selection, and so forth. All of these as trendlines, channels, candlesticks, point and models are employing statistical and artiicial igure, indicators and oscillators, various moving intelligence techniques.
Moreover, the regression, probit regression, logit analysis, linear state of eficiency according to eficient market or quadratic multivariate discriminant analysis, hypotheses determines the type of analysis as well multidimensional scaling, simulation techniques, as the random walk hypotheses.
Those systems comprise the internal pool of information sepa- The generic model in an abstracting mode can be rated conceptually based on different economic presented in the following diagram. Those the sake of discussion upon the generic topics. This model should be adapted in The accounting information systems generally the strategic alignment perspective Figure 3 include modules of accounts receivable-payable, and should be discussed by taking in account generally ledger, payroll sometimes separated relevant contingencies Theodorou, , , module , order entry, billing, ixed assets ac- The components of the generic FIS will be counting, and income tax preparation.
The basic discussed in the following paragraphs. The critical attributes of those systems IFRS. Accounts receivable and payable record are the level of detail, the ability to disaggregate invoice and billing and helps schedule payments costs according to behavior, the frequency with and issuing checks.
Produce aging reports for which information is recorded, and the extent of cash collection that is also found in order entry calculation of variances. The more functional the applications. Payroll systems include pay rate, type of MAIS the greater detail it provides, the vacations hours tax, and other deductions and better behavior classiication it provides, as well tax reports.
Fixed asserts systems monitor and as frequent reporting, and calculation of vari- report the download of buildings, vehicles, and ances.
The level of detail is analyzed by Chenhall equipment for depreciation calculations and tax and Morris , Felthan , Kaplan and treatment, the gain or loss on assets sale, and so Norton , and Karmarkar et al. The forth. Feltham as well as Chenhall and The management accounting Information Morris point out that decisions that are system MAIS is mainly dedicated in cost and based on more detailed information are capable inventory control and planning.
The system col- for performance increase in relation to decisions lects, classify, and reports information that assists which are based on more aggregated information in inancial planning and control of production due to accuracy.
The system provides traced to the procedure and indirect, ixed, and expost data for performance evaluation against variable costs allocated to the procedures. This predetermined goals and standards by the inancial requires a meaningful classiication of cost ac- system. TCCI systems are managing to take corrective actions and accomplish it with cost by means of standards, variances, and other the environmental changes i.
Chenhall and In TCCI organizational performance is increased Morris found that frequency has a positive by maximizing individual eficiency McNair, impact on performance for irms that operate in in relation to ACCI systems where interre- uncertain environment. EDGAR, among frequency of reporting increased the performance others, delivers fundamental data, global annual of the system.
Ibbotson, ; Karmarkar et al. Variance analysis feed the inan- for asset allocation, investment management, cial information system with appropriate data in forecasting, education, and NASD-reviewed order to achieve budgetary control and help the presentation material. Presentation material is administrative monitoring. Furthermore, inelastic used to explain and demonstrate asset allocation pricing and contracts increase the need for vari- strategies and investment concepts.
Ibbotson of- ance analysis as they force irms to adopt risk of fers software and data for investment planning, unexpected cost and utilization. Finally, variance analysis, and asset allocation. EnCorr also ; Covaleski et al. EnCorr Attribution is used to analyze manage- the external Financial information ment style and attribute performance to investor systems decisions. EnCorr Allocator is used to implement asset allocation policy and Ibbotson Scenario Market data that will feed the inancial informa- builder is used toanalyze what-if scenarios.
These tion system are obtained through external DBMS. Investment Planning well as published information of inancial ac- Software and Data includes the Portfolio Strate- counts of other irms. Some of those databases gist and Analyst, the Security Classiier, and the need registration while others are free of charge.
Investment Planning Data module. The software Examples are Bloomberg, Datastream, Hoovers, determines the optimal asset mix with the higher Yahooinance, Plats, Edgar, Ibbotson, Reuters, and return and minimum risk. Find portfolios with so forth. In this category we can refer interbank the highest chance to obtain desired returns. Ac- systems like SWIFT as well as stock exchange count the impact of taxes and create comparisons information systems provided from various bro- of multiple portfolio allocations on the eficient kers.
Those systems monitor and report the results frontier. Moreover, examine the effect of changing of the stock exchange markets. Classify security holdings to recommend markets, price contributors, research services, and an asset allocation to implement the plant with news. Also included are real-time prices, price mutual funds and look at historical behavior. The Security inancial information system of Reuter enables Classiier deines the allocation of the portfolio the market analysis and trading and investing and maintains a database of over 21, mutual opportunities identiication, risk assessment of funds, annuity subaccounts, and stocks.
In the different strategies, ability to communicate with Ibbotson database, more than 5, mutual funds, other market participants, direct trading, and ac- 7, annuity subaccounts and 8, individual cess to executable prices and trading tools.
Reuter securities have been classiied. Finally, service premium inancial information system incorpo- extends to security classiier, risk assessment, rates trading functionality of the equity, ixed mean variance optimizer, historical calculations, income, foreign exchange, and commodities from wealth forecasting using straightforward analyti- the desktop system of the company. Regarding cal model and Monte Carlo simulation, and fund the front ofice, Reuter offers pretrade analysis, optimizer that determines the portfolio of mutual limits checking, real time positioning, pricing funds and subaccounts that most closely matches analytics, tactical risk management, and proit a target asset allocation.
Regarding the middle ofice, it The Reuter systems deliver inancial informa- offers limits management, market risk and credit tion generated by exchanges, over-the-counter risk management, back testing, enterprise wide Figure 2. In the needs for sales and capacity additions as well as back ofice, prevalidation is offered along with investment needs.
Future capacity investments back validation, settlement, cash management, will be selected according to the required returns accounting, reporting, and messaging.
Material needs and their costs Bloomberg providse real-time and archived will be determined in conjunction with MRPI inancial, market data, pricing, trading news, systems. Sales budget, production budget, and and communications tools. Platts is a division of inventory budget along with former inancial McGraw-Hill Companies dedicated to energy statements provided by AIS will determine inancial information for oil, electricity, gas, the forecasted pro-forma inancial statements coal, nuclear, petrochemicals, and metals.
Platts upon which further analysis will be contacted offers energy benchmark pricing, forward curves, i. Portfolio management, inancial, and spe- All the data and information collected from ciically credit risk analysis will also be used for internal and external FIS are processed further in working capital and current assets management.
In the following paragraph we price of both materials and end products on the spot will present the processing box operations along and secondary markets wherever are organized with the quantitative methods used to solve spe- otherwise in OTC. FIS will determine metrics ciic problems. Fundamental, technical processinG box And trends, support and resistance levels, reversal QuAntitAtive Methods and continuation patterns, head and shoulders, oF AnALysis triangles, pennants, lags, candlesticks, point and igure charts, etc.
The internal ters of accounting. In the front and middle ofice database and mainly the MAIS will provide FIS the operations of market analysis, risk hedging, with the inputs relative to the unit cost classi- and trading monitoring will be accomplished ied according to behavior and activities. AIS while back ofice operations will include, risk will provide the relevant inputs for the inancial measurement and reporting, accounting handling, statement forecasting and for the estimation of and credit risk control.
Various quantitative tech- pro-forma inancial statements. Sales and market- niques are employed to model credit ratings using ing information systems will provide the relevant artiicial neural networks ANN and sovereign forecasts for the sales budget. Lewellen model failure and bankruptcy prediction, and so used the book-to-market ratio as a predictor forth.
All of these models employ statistical and while Kothari and Shanken have used the artiicial intelligence techniques to solve different lagged book-to-market ratio. Predictive regression inancial problems. In the irst case techniques also was used by French, Schwert, and Stambaugh such as linear and nonlinear regression, probit predictor was the return variance obtained regression, logit analysis, linear or quadratic mul- from an ARIMA model. Linear regression inally tivariate discriminant analysis, multidimensional could be found in popular studies of the capital scaling, simulation techniques, logistic regression asset pricing model CAPM.
Black et al. The category of artiicial stage cross-sectional regression method. Finally, intelligence consists of artiicial neural networks, we can refer the work of Cantor and Packer case base reasoning, genetic algorithms, and ge- and Trevino and Thomas a, b. Another netic programming. Each of the above techniques type of regression which is also used in FIS is that has been used so as to provide solutions in differ- of probit and logit.
Linear multivariate discriminant analysis trivial, can eficiently solve many forecasting was used by Altman , Belkaoi , and problems. Multivariate linear regression was used Tafler , and quadratic multivariate discrimi- by J.
Mar et al. Logistic regression was long-term credit administration.
Schwartz used by Wiginton to compare logit and identiied four determinants of bid-ask spread discriminant models of consumer credit behavior. Finally, simulation techniques spreads and those factors. Prediction regressions have been used in economic analysis, decision and autoregression models have been applied by making, and operational research.
Simulation Keim and Stambaugh to predict the excess techniques have been applied in inancial based returns by some lagged variables: a the difference computer systems, management games, for deci- between the yield on long-term BAA underrated sion making, and operational research Barton, corporate bonds and the short-term Treasury bill ; Vlatka et al.
Using the same the study of empirical properties of performance technique, Fama and French estimated the measures for mutual funds. Additionally, Campell and Shiller used to ind solutions in complex optimization found that the lagged dividend-price ratio problems. Genetic algorithm offer advantages over and lagged dividend growth rate have a signiicant the usual optimization techniques.
Mahfoud and relation with stock returns. Genetic options. Kelly shows that the ANN was algorithms do not require gradient information, superior than the binomial model in a study to so there will be no problem in such optimization.
Moreover, genetic algorithms are more likely to irms. Healey et al. Bennell and Sutcliffe at once. The global optimum is more dificult to be compare the performance of Black-Scholes found by other optimization techniques which do model with an ANN in pricing European-style not search as genetic algorithms.
Finally, genetic call options on the FTSE index. They provide programming is a methodology that executes an extensive study on the performance of ANNs a procedure which guide automatically to the in pricing UK options.
The results have shown solution of the deined problem. Jozef tion, simulation of market behaviour, corporate and Gemela studied the use of probabilis- loan portfolio risk evaluation, risk assessment, and tic Bayesian networks in fundamental inancial pricing inancial derivatives.
Brown et al. They present the construction of a Bayes- talk about FALCON, a inancial information sys- ian network for the inancial analysis of speciic tems that use ANNs by large credit card companies irms and sectors of the Czech economy.
Zhang to screen transactions for potential fraud and credit et al. They mention that extensive Furthermore, extensive literature can be found literature can be found in inancial applications concerning the topic of pricing options using of ANNs. ANNs have been used for forecasting artiicial neural networks. Malliaris and Salchen- bankruptcy and business failure Tsakonas et al.
Zhang, Hu, Patuwo, and Indro use of the Black-Scholes model and an ANN showing neural networks for modelling bankruptcy and that the ANN model was superior for out-of- they linked to the Bayesian classiication theory.
Hutchinson, Lo, tion of rough sets and neural networks. All three networks Comparisons of results with other techniques were better than the Black-Scholes model. Qi such as inductive machine learning and genetic and Maddala compare the performance algorithms are also performed.
They have indicated that ANNs were better forecasting tool for exchange rates, stock prices, than Black-Scholes formula.
The superiority of and volatility. The work of Weigend et al. Kaastra and Boyd and distinguish them in in-the-money and out-of- provide a procedure to design a neural network the-money categories. They compare the genetic forecasting model for inancial and economic time programming tree with the Black-Scholes model series.
Kim proposes a genetic algorithm in its capability to hedge. Finally, we could ind approach in ANNs for inancial data mining. They problems. Ince and Trafalis developed present that the volatility forecasts from neural a short-term management model based on the networks with realized volatility are about the volatility around the earning announcements.
Bennell et al. IT system should be examined under the strategic believe that neural networks are superior alignment perspective Theodorou, , , to ordered probit models which have been used Otherwise performance comparisons for credit rating.
They found that ANNs, which and benchmarking practices will lead to wrong are used by major rating agencies e. Bentz and Merunka certainty and volatility where the business oper- showed that the neural network can be ates under certain regulations Chenhall, ; used as a generalization of the multinomial logit Theodorou, Performance achievements model which is used for brand choice modelling.
Mahfoud and size, age, and so forth. They with the relevant literature. The frequency of tested the genetic algorithm system and a neural FIS reporting, the level of FIS detail, the level of network system on 5, stocks where genetic integration among internal, and external inancial algorithm systems produced better inal results. The more volatile the environment genetic algorithms as an alternative method for where the irm operates the greater the need for modelling inancial decisions.
In this ield, many the FIS to generate frequent reporting and higher optimization techniques have been used, such level of detail in order for management to take as heuristic method, linear programming, and corrective actions Theodorou, Thus, neural optimization networks.
The technique of decision making needs to do frequent corrective genetic programming has been used in inancial actions in a volatile environment. Rigid structure topics, such as option pricing. Decision making in processing box and the quantitative methods. The a more detailed FIS model is also another topic components of the inancial information system that has to be examined using the criterion of described in the previous sections should be performance. Sometimes potential beneits of chosen according to the environment where the frequent reporting, greater detail, and integration irm operates and its existing structure.
Increased do not exceed the cost of the system. Implement- performance and competitive advantage by the ing a sophisticated FIS system entails costs of system will be expected only if modiications of consulting, training, and maintenance, but not business structure and the systems design are the cost of investing.
For example, if the irm aligned with the environment. For example, a has no signiicant number of counterparts than business with a lexible structure designed around the cost of a credit risk system may exceed the risk management can better operate in a volatile beneits realized.
Finally, further research can environment. The inancial information system be conducted regarding the commonly adopted of this business should incorporate modules of quantitative methods by successor irms. In such an environment where nonstationarity of the mean exist, the com- Abernethy, M.
More and personnel controls. Accounting, Organiza- advanced computational methods must be applied, tions and Society, 22 , The volatility SV models, models that use stochas- role of professional control in the management of tic processes, and computational intelligence of complex organizations. Moreover, the computational techniques of autoregressive and generalized autoregressive Ahn, B. Expert Systems with Applications, describe volatility clustering, excess kurtosis, 18, Finally, there is no need to incorporate this computational intelligence and Altman, E.
Financial ratios, discrimi- the structural processes of risk management in nant analysis and the prediction of corporate bank- the inancial information systems which operate ruptcy. Journal of Finance, 23 3 , If we do Baker, M. Appearing and so, than the return on the additional not needed disappearing dividends: The link to catering invested capital will be decreased as well as the incentives.
Journal of Financial Economics, 73, overall performance. That is why future research must take into account the alignment framework Theodorou, Belkaoi, A. Industrial bond ratings: A new , , in order to decide about the look. Financial Management, Autumn, Modelling sovereign credit ratings: into account behavioral characteristics.
Neural networks versus ordered probit. Expert Finally, until now there is no research indicating Systems with Applications, 30, Also there is Bennell, J. Black-Scholes nothing indicating how the effect of frequency of versus artiicial neural networks in pricing FTSE reporting, level of detail, and integration of the FIS options. Intelligent Systems in Accounting, model with enterprise resource planning systems Finance and Management, 12, ERP impacts business performance.
Bentz, Y. Journal of Forecasting, Chen, A. Performance 19, Bergerson, K. A com- Journal of Forecasting, 24, Management control International Conference on Neural Networks, systems design within its organizational context: Seattle, Washington, pp. Findings from contingency-based research and directions for the future. Accounting, Organiza- Black, F. The capital asset pricing model: Some empirical tests.
Studies in the theory of capital Chenhall, R. The markets. New York: Praeger. An empirical investigation using a system ap- , May.
Neural networks enter the world of proach. Accounting, Organizations and Society management accounting. Management Account- 23 3 , Chenhall, R. The impact Bruggeman, W. The of structure, environment, and interdependence impact of technological change on management on the perceived usefulness of management ac- accounting. Management Accounting Research, counting systems. The Accounting Review, 61, 6, Campbell, J. The divi- Choe, J.
The consideration of cultural dend-price ratio and expectations of future divi- differences in the design of information systems. Studies, 1, Cooper, D. Ac- Cantor, R.
Determinants counting in organized anarchies. Accounting, and impact of sovereign credit ratings. Federal Organizations, and Society, 6, Cooper, R.
The design of cost management systems: Text, cases, and readings. Casdagli, M. Weigend, B. Activity-based D. Rumelhart Eds. Cooper, J. Variance analysis Chen, S. Healthcare Finan- Hedging derivative securities with genetic pro- cial Management, 48, International Journal of intelligent Covaleski, M.