The University of Technology Sydney’s Quantitative Finance Research Centre always has a plethora of financial research projects simmering away, with 2015-release projects looking at a variety of finance topics impacting the Australian finance industry. These topics include discussions and investigations of retirement incentives and member engagement; the impacts of social interactions, adaptive learning and different opinions on asset pricing; and theoretical approaches to pension fund economics.
A rundown of the financial research projects set to be released in 2015 follows.
A New Theoretical Approach to Pension Fund Economics, Asset Management and Insurance
Costing $270,000 across three years, this research is to provide groundbreaking approaches to the pricing and hedging of long-dated contracts, the type usually found in pensions, insurance policies, and variable annuities. The researchers, Professors Eckhard Platen and Erik Schlogl, propose a design shift that allows the creation of sustainable pension schemes that are significantly less expensive to build than the current system could ever permit.
The drawdown-constrained portfolios will be built with maximum long-term growth rates using Platen’s own benchmark approach. The goal is to dramatically increase retirement benefits using new theoretical understandings of risk and asset management in pension schemes.
Alternative Approaches to Structuring Retirement Incentives and the Drivers that Affect Consumer Engagement
The Department of Treasury has commissioned a study into how superannuation and retirement funds can better achieve the accumulation phase goals of members using a deeper understanding of the elements that drive engagement in retirement funds.
The research is being carried out by Professors Dave Michayluk and Brockman for the Centre of Excellence for International Finance and Regulation Consortium, using Australian and United States’ schemes, both of which provide great swathes of research fodder due to their distinctive differences. The different components in each of the regimes is a possible driving force in member engagement, therefore impacting on accumulation phase savings goals.
Asset Pricing with Social Interactions, Adaptive Learning, and Differences in Opinion
This $200,000-plus research project, conducted over three years by Kai Li, Professor Xuezhong He and Dr Lei Shi, aims to develop greater understanding and a framework for measuring the impact of social interactions, adaptive learning and differences of opinion when it comes to evolving asset pricing. This will help to guide future policy decisions and market regulation.
Institutional transaction costs in the Australian equities market
Professor Talis Putnins is completing research to better understand the characteristics and efficiencies in the Australian equities market, to analyse trends and the impact of recent changes in market structures, such as the regulation of dark trading and the introduction of Chi-X. The growth in algorithmic and high-frequency trading is also being measured. Regulatory data will be used to reconstruct parent+ orders executed gradually through smaller child+ orders, allowing for more accurate measurement of transaction costs. This is done by accounting for price impact during the gradual execution of the large order.
The implications for this project will spill into policy level and go towards improving market structure, possibly regulating high-frequency/algorithmic trading, and allow a closer look at the regulation of dark trading.
Mutual Fund Connections, Investment Strategy Distinctiveness and Performance
This project looks at how mutual fund connectedness impacts on performance using social network proxies as a measure – that is, the number of fund managers who are sharing their time and efforts with other funds within the same funds management company.
While previous research has focused on how mutual fund portfolio holdings similarity affects fund performance, this study wants to see what the implications are for fund connections in performance and investment strategy distinctiveness.
The study is being conducted by Dr Lorenzo Casavecchia and C. Dobson for the Accounting & Finance Association of Australia and New Zealand under a research grant.
Other industry studies currently in progress at UTS include:
- CIFR - Financial System Inquiry into Red Tape and counter-cyclical policy options
- Effects of Bank Capital Recommendations from the Financial System Inquiry
- Optimisation Algortihums for Planning and Scheduling Dedicated Resources
- Pricing & Risk Management for High Frequency Cyclical Commodity Motels
- Risk assessment of climate change mitigation measures
- Systematic credit portfolio risk and implications on regulations for bank capitals and securitisation ratings - CIFR Project
- Too central to fail: financial networks, risks and policy responses - Centre of Excellence for International Finance & Regulation