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|Subject: Re: MPT and Efficient Frontier||Date: 7/18/2000 12:26 PM|
|Author: solasis||Number: 41 of 295|
have you read chris may's book Non-linear Pricing ?
expensive but definitely worth the price imho.
regarding super-cat, i agree with your general assumptions. past history indicates that large super-cat events improve pricing in the subsequent years. the problem with super-cat as an investor (fyi i am an owner of BRK class b shares) is that even with a longer term horizon, say 10, 20 years or even 30 years, there is a not insignificant probability that super-cat events can cluster within those time frames.
as far as normalizing price structure volatility, in risk arbitrage i have been adpating some techniques developed in the currency markets by the folks at Olsen in Zurich - http://www.olsen.ch/library/research/oa_working.html
their focus of course is very short term, but i think that some of this stuff is very scaleable.
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