Prof Carol Alexander

Biography

Carol Alexander is Professor of Finance and Head of the Business and Management Department. She is also co-editor-in-Chief of the Journal of Banking and Finance, with Ike Mathur. She was Chair of Financial Risk Management at the ICMA Centre in the Henley Business School at Reading (1999 – 2012) and lecturer in Mathematics and Economics at the University of Sussex (1985 - 1988). She holds degrees from the University of Sussex (BSc First Class, Mathematics with Experimental Psychology; PhD Algebraic Number Theory) and the London School of Economics (MSc Econometrics and Mathematical Economics). She also has an Honorary Professorship at the Academy of Economic Studies in Bucharest, Romania.

Carol has held the following positions in financial institutions: Fixed Income Trader at UBS/Phillips and Drew (UK); Academic Director of Algorithmics (Canada); Director of Nikko Global Holdings and Head of Market Risk Modeling (UK); Risk Research Advisor, SAS (USA). She also acts as an expert witness and consultant in financial modelling. From 2010 – 2012 Carol was Chair of the Board of PRMIA (Professional Risk Manager's International Association).

She publishes widely on a broad range of topics, including: volatility theory; option pricing and hedging; trading volatility; hedging with futures; alternative investments; random orthogonal matrix simulation; game theory and real options. She has written and edited numerous books in mathematics and finance and published extensively in top-ranked international journals. Her four-volume textbook on Market Risk Analysis (Wileys, 2008) is the definitive guide to the subject.

Role

Professor of Finance, Head of Business and Management Department

Community and Business

Carol frequently consults for banks, asset managers, exchanges, pension funds and other financial institutions. She acts as an expert witness, designs software (some models are patented) and undertakes model validation work. She has a large and growing network of contacts with finance professionals around the globe. For further details of Carol's industry-engagement activities see www.carolalexander.org 

My research spans mathematical, quantitative and statistical finance and financial econometrics. I like to work with junior colleagues, often PhD students, in a research leader role. Profiles of my PhD students can be found here http://www.carolalexander.org/phd_students.php. My papers tend to focus on new theoretical developments, usually but not always accompanied by some empirical work.

I have worked on volatility for most of my career as a finance academic, from the discrete and continuous time perspectives. Here the main financial applications that I consider are to risk management, especially to hedging options or hedging with futures and to market risk assessment.

Another on-going theme of my research is to exchange-traded products with derivative-type characteristics. I have developed high-frequency pricing and hedging models that are patented and now used by market makers on the New York Stock Exchange. More recent work in this area focusses on volatility exchange-traded products.

Trading strategies for hedge funds has been another long-standing interest. I consult quite often in this area and some of the models that I have designed have formed the basis of popular strategies in the long-short equity category, for instance:

Alexander, Carol (1999) Optimal hedging using co-integration. Philosophical Transactions of the Royal Society  A, 357 (1758). pp. 2039-2058.

Recently I have been working on developing new simulation models. Here the only work published to date introduces Random Orthogonal Matrix (ROM) simulation. The first of these papers is co-authored with my PhD supervisor Walter Ledermann and his grandson Daniel, who was my PhD student at the time. It was published on the centenary of Walter’s birth:

Ledermann, W., Alexander, C. and D. Ledermann (2011) ‘Random orthogonal matrix simulation’ Linear Algebra and its Applications 434, 1444-1467

Another fairly recent interest is in the area of real options and game options and I hope to publish several methodological papers here in the near future. Some of my work (such as recent developments in data-snooping) remains unpublished because it is used as the basis for proprietary trading.

SSRN author page: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=249448

Google Scholar profile: http://scholar.google.co.uk/citations?user=OTfbBkAAAAAJ&hl=en&oi=ao

Personal research pages: http://www.carolalexander.org/research.php

Recent publications:

Alexander, C., Lazar, E. and S. Stanescu (2013) ‘Forecasting VaR using analytic higher moments for GARCH processes’ International Review of Financial Analysis (Forthcoming)

Alexander, C. and D. Korovilas (2013) ‘Volatility exchange-traded notes: curse or cure?’ Journal of Alternative Investments (Forthcoming)

Kaeck, A. and C. Alexander  (2013) ‘Stochastic volatility jump-diffusions for European equity index dynamics’ European Financial Management doi: 10.1111/j.1468-036X.2011.00613.x

Alexander, C., Propoczuk, M. and A. Sumawong (2013) ‘The (de)merits of minimum-variance hedging: Application to the crack spread’ Energy Economics 36, 698-707 

Kaeck, A. and C. Alexander  (2013) ‘Continuous-time VIX dynamics: on the role of stochastic volatility of volatility’ International Review of Financial Analysis 28, 45-56

Carol has deisgned the curriculum for Sussex's new Masters in Financial Risk and Investment Analysis. She is currently designing a new BSc in Finance (which will be available as a sole major, or in conjuction with other subjects such as Economics) and has plans to introduce further path-breaking and innovative Masters degrees at Sussex starting in September 2015.

Student Consultation

My office hours are usually:

9:00 - 10:00 Monday

2.00 - 3.00 Friday

Kaeck, Andreas and Alexander, Carol (2013) Continuous-time VIX dynamics: on the role of stochastic volatility of volatility. International Review of Financial Analysis, 28. pp. 46-56. ISSN 10575219

Kaeck, Andreas and Alexander, Carol (2013) Stochastic volatility jump-diffusions for European equity index dynamics. European Financial Management, 19 (3). pp. 470-496. ISSN 1354-7798

Alexander, Carol, Prokopczuk, Marcel and Sumawong, Anannit (2013) The (de)merits of minimum-variance hedging: application to the crack spread. Energy Economics, 36. pp. 698-707. ISSN 0140-9883

Kaeck, Andreas and Alexander, Carol (2012) Volatility dynamics for the S&P 500: further evidence from non-affine, multi-factor jump diffusions. Journal of Banking & Finance, 36 (11). pp. 3110-3121. ISSN 0378-4266

Alexander, Carol and Venkatramanan, Aanand (2012) Analytic approximations for multi-asset option pricing. Mathematical Finance, 22 (4). pp. 667-689. ISSN 0960-1627

Ledermann, Daniel and Alexander, Carol (2012) Further properties of random orthogonal matrix simulation. Mathematics and Computers in Simulation, 83. pp. 56-79. ISSN 0378-4754

Alexander, Carol and Sarabia, José María (2012) Quantile uncertainty and value-at-risk model risk. Risk Analysis: An International Journal, 32 (8). pp. 1293-1308. ISSN 1539-6924

Alexander, Carol and Kaeck, Andreas (2012) Does model fit matter for hedging? Evidence from FTSE 100 options. Journal of Futures Markets, 32 (7). pp. 609-638. ISSN 0270-7314

Alexander, Carol, Cordeiro, Gauss M, Ortega, Edwin M M and Sarabia, José María (2012) Generalized beta-generated distributions. Computational Statistics and Data Analysis, 56 (6). pp. 1880-1897. ISSN 0167-9473

Alexander, Carol, Rubinov, Alexander, Kalepky, Markus and Leontsinis, Stamatis (2012) Regime-dependent smile-adjusted delta hedging. Journal of Futures Markets, 32 (3). pp. 203-229. ISSN 0270-7314

Venkatramanan, Aanand and Alexander, Carol (2011) Closed form approximations for spread options. Applied Mathematical Finance, 18 (5). pp. 447-472. ISSN 1350-486X

Ledermann, Walter, Alexander, Carol and Ledermann, Daniel (2011) Random orthogonal matrix simulation. Linear Algebra and its Applications, 434 (6). pp. 1444-1467. ISSN 0024-3795

Alexander, Carol and Lazar, Emese (2009) Modelling regime-specific stock price volatility. Oxford Bulletin of Economics and Statistics, 71 (6). pp. 761-797. ISSN 0305-9049

Alexander, Carol, Kaeck, Andreas and Nogueira, Leonardo M (2009) Model risk adjusted hedge ratios. Journal of Futures Markets, 29 (11). pp. 1021-1049. ISSN 0270-7314

Alexander, Carol and Sheedy, Elizabeth (2008) Developing a stress testing framework based on market risk models. Journal of Banking & Finance, 32 (10). pp. 2220-2236. ISSN 0378-4266

Alexander, Carol and Venkatramanan, Aanand (2008) Commodity options. In: The handbook of commodity investing. Frank J Fabozzi Series . Wiley , Hoboken, New Jersey, pp. 570-595. ISBN 978-0470117644

Alexander, Carol (2008) Market risk analysis I: quantitative methods in finance. John Wiley & Sons, Chichester. ISBN 978-0470998007

Alexander, Carol (2008) Market risk analysis II: practical financial econometrics. John Wiley & Sons, Chichester. ISBN 978-0470998014

Alexander, C and Barbosa, A (2008) Hedging index exchange traded funds. Journal of Banking and Finance, 32 (2). pp. 326-337. ISSN 0378-4266

Alexander, Carol and Sheedy, Elizabeth, eds. (2008) The professional risk manager's guide to financial instruments. PRMIA Risk Management Series . McGraw-Hill, New York. ISBN 9780071546492

Alexander, Carol and Sheedy, Elizabeth, eds. (2008) The professional risk managers' guide to finance theory and application. PRMIA Risk Management Series . McGraw-Hill, New York. ISBN 9780071546478

Alexander, Carol and Sheedy, Elizabeth, eds. (2008) The professional risk manager's guide to financial markets. PRMIA Risk Management Series . McGraw-Hill, New York. ISBN 9780071546485

Alexander, Carol (2008) Market risk analysis III: pricing, hedging and trading financial instruments. John Wiley & Sons, Chichester. ISBN 978-0470997895

Alexander, Carol (2008) Market risk analysis IV: value-at-risk models. Wiley Finance Series, 4 . John Wiley & Sons, Chichester. ISBN 9780470997888

Alexander, Carol and Kaeck, Andreas (2008) Regime dependent determinants of credit default swap spreads. Journal of Banking & Finance, 32 (6). pp. 1008-1021. ISSN 0378-4266

Alexander, Carol and Nogueira, Leonardo M (2007) Model-free price hedge ratios for homogeneous claims on tradable assets. Quantitative Finance, 7 (5). pp. 473-479. ISSN 1469-7688

Alexander, Carol and Barbosa, Andreza (2007) Effectiveness of minimum-variance hedging. Journal of Portfolio Management, 33 (2). pp. 46-59. ISSN 0095-4918

Alexander, Carol and Nogueira, Leonardo M (2007) Model-free hedge ratios and scale-invariant models. Journal of Banking & Finance, 31 (6). pp. 1839-1861. ISSN 0378-4266

Yigitbasioglu, Ali Bora and Alexander, Carol (2006) Pricing and hedging convertible bonds: delayed calls and uncertain volatility. International Journal of Theoretical and Applied Finance , 9 (3). p. 415. ISSN 0219-0249

Alexander, Carol and Lazar, Emese (2006) Normal mixture GARCH (1, 1): applications to exchange rate modelling. Journal of Applied Econometrics, 21 (3). pp. 307-336. ISSN 0883-7252

Alexander, Carol (2005) The present and future of financial risk management. Journal of Financial Econometrics, 3 (1). pp. 3-25. ISSN 1479-8409

Alexander, Carol and Dimitriu, Anca (2005) Indexing, cointegration and equity market regimes. International Journal of Finance & Economics, 10 (3). pp. 213-231. ISSN 1076-9307

Alexander, Carol and Sheedy, Elizabeth, eds. (2005) The professional risk managers' handbook: a comprehensive guide to current theory and best practices. PRMIA Publications, New York & London. ISBN 9780976609704

Alexander, Carol and Dimitriu, Anca (2005) Detecting switching strategies in equity hedge funds returns. Journal of Alternative Investments, 8 (1). pp. 7-13. ISSN 1520-3255

Alexander, Carol and Dimitriu, Anca (2005) Indexing and statistical arbitrage. Journal of Portfolio Management, 31 (2). pp. 50-63. ISSN 0095-4918

Alexander, Carol and Dimitriu, Anca (2005) Rank alpha funds of hedge funds. Journal of Alternative Investments, 8 (2). pp. 48-61. ISSN 1520-3255

Alexander, Carol and Barbosa, Andreza (2005) The spider in the hedge. Review of Futures Markets, 14 (1). pp. 93-116. ISSN 0898-011X

Alexander, Carol and Scourse, Andrew (2004) Bivariate normal mixture spread option valuation. Quantitative Finance, 4 (6). pp. 637-648. ISSN 1469-7688

Alexander, Carol and Dimitriu, Anca (2004) Equity indexing: optimize your passive investments. Quantitative Finance, 4 (3). C30-C33. ISSN 1469-7688

Alexander, Carol (2004) Normal mixture diffusion with uncertain volatility: Modelling short- and long-term smile effects. Journal of Banking & Finance, 28 (12). pp. 2957-2980. ISSN 0378-4266

Alexander, Carol and Dimitriu, Anca (2004) Sources of outperformance in equity markets. Journal of Portfolio Management, 30 (4). pp. 170-185. ISSN 0095-4918

Alexander, Carol, ed. (2003) Operational risk: regulation, analysis and management. Professional Finance Series . Pearson Education Ltd., Harlow. ISBN 9780273659662

Alexander, Carol (2002) Principal component models for generating large GARCH covariance matrices. Economic Notes, 31 (2). pp. 337-359. ISSN 1468-0300

Alexander, Carol, Giblin, Ian and Weddington, Wayne (2002) Cointegration and asset allocation: a new active hedge fund strategy. Research in International Business and Finance, 16. pp. 65-90. ISSN 0275-5319

Alexander, Carol, ed. (2001) Mastering risk volume 2: applications. Financial Times Mastering Series, 2 . Pearson Education Ltd., Harlow. ISBN 9780273654360

Alexander, Carol (2001) Market models: a guide to financial data analysis. John Wiley & Sons, Chichester. ISBN 9780471899754

Alexander, Carol (2000) Measuring operational risks with Bayesian belief networks. Derivatives Use, Trading and Regulation, 6 (2). pp. 166-196. ISSN 1357-0927

Alexander, Carol, ed. (2000) Visions of risk. Financial Times/ Prentice Hall, Harlow. ISBN 978-0877783206

Alexander, Carol (1999) Optimal hedging using cointegration. Philosophical Transactions A: Mathematical, Physical and Engineering Sciences, 357 (1758). pp. 2039-2058. ISSN 1471-2962

Alexander, Carol, ed. (1998) Risk management and analysis volume 1: measuring and modelling financial risk. Wiley Series in Financial Engineering, 1 . John Wiley & Sons, Chichester. ISBN 978-0471979579

Alexander, Carol, ed. (1998) Risk management and analysis volume 2: new markets and products. Wiley Series in Financial Engineering, 2 . John Wiley & Sons, Chichester. ISBN 978-0471979593

Alexander, Carol and Giblin, Ian (1997) Multivariate embedding methods: forecasting high-frequency financial data in the first INFFC. Journal of Computational Intelligence in Finance, 5 (6). pp. 17-24. ISSN 1092-7018

Alexander, C O and Leigh, C T (1997) On the covariance matrices used in value at risk models. Journal of Derivatives, 4 (3). pp. 50-62. ISSN 1074-1240

Alexander, Carol (1996) The handbook of risk management and analysis. John Wiley & Sons, Chichester. ISBN 9780471953098

Alexander, C O and Ledermann, W (1996) Are Nash bargaining wage agreements unique? An investigation into bargaining sets for firm-union negotiations. Oxford Economic Papers, 48 (2). pp. 242-253. ISSN 0030-7653

Alexander, Carol (1996) Evaluating the use of RiskMetrics as a risk measurement tool for your operation: advantages and limitations. Derivatives: Use, Trading and Regulation, 2 (3). pp. 277-285. ISSN 1753-9641

Alexander, C O and Rendell, H M (1995) Data generation processes for spatial series: the example of ephemeral channel form. Geographical Analysis, 27 (1). pp. 78-93. ISSN 0016-7363

Alexander, Carol and Wyeth, John (1995) Causality testing in models of spatial market integration: a comment on an article by Stefan Dercon. Journal of Development Studies, 32 (1). pp. 144-146. ISSN 0022-0388

Alexander, Carol O (1995) Common volatility in the foreign exchange market. Applied Financial Economics, 5 (1). pp. 1-10. ISSN 0960-3107

Alexander, Carol and Barrow, Michael (1994) Seasonality and cointegration of regional house prices in the UK. Urban Studies, 31 (10). pp. 1667-1689. ISSN 0042-0980

Alexander, Carol and Wyeth, John (1994) Cointegration and market integration: an application to the Indonesian rice market. The Journal of Development Studies, 30 (2). pp. 303-334. ISSN 0022-0388

Alexander, C O and Ledermann, W (1994) The constrained Nash bargaining solution. Journal of the Operational Research Society, 45 (8). pp. 954-958. ISSN 0160-5682

Alexander, Carol O (1993) The changing relationship between productivity, wages and unemployment in the UK. Oxford Bulletin of Economics and Statistics, 55 (1). pp. 87-102. ISSN 0305-9049

Alexander, C O and Johnson, A (1992) Are foreign exchange markets really efficient? Economics Letters, 40 (4). pp. 449-453. ISSN 0165-1765

Alexander, Carol (1992) The Kalai-Smorodinsky bargaining solution in wage negotiations. Journal of the Operational Research Society, 43 (8). pp. 779-786. ISSN 0160-5682

Alexander, Carol, Giblin, Ian and Newton, David (1992) Symmetry groups of fractals. Mathematical Intelligencer, 14 (2). pp. 32-38. ISSN 0343-6993

van der Ploeg, Carol (1988) On a converse to the Tschebotarev density theorem. Journal of the Australian Mathematical Society (Series A), 44 (3). pp. 287-293. ISSN 1446-7887

van der Ploeg, Carol (1987) Duality in non-normal quartic fields. American Mathematical Monthly, 94. pp. 279-284. ISSN 0002-9890

Ledermann, Walter and van der Ploeg, Carol (1985) Integral bases of dihedral numberfields. I. Journal of the Australian Mathematical Society (Series A), 38 (3). pp. 351-371. ISSN 1446-7887