Kian Lim

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Lim Kian Guan is Overseas Union Bank chair professor in the quantitative finance area at Singapore Management University. He holds a PhD in financial economics from Stanford University. Lim has consulted for major banks in risk validation and has taught in various business executive development courses. He has published in Journal of Financial Markets, Finance and Stochastics, Journal of Financial and Quantitative Analysis, Journal of Financial Economics, Review of Economics and Statistics, and many other refereed journals in quantitative finance, derivatives, computational statistics, risk analytics, investment analyses, commodities, machine learning, accounting, real estate, maritime economics, transportation, operations research, and so on. He has been active in university administration including being vice-provost. Lim is the recipient of the Singapore Public Administration Medal (Silver) in 2012 and the SMU Distinguished Educator Award in 2021.

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Temple University

Università degli Studi di Bergamo (University of Bergamo)

Nagesh Manda

Marilyn Wiley

University of North Texas

Robert Daigler

Enrique Hernandez

Sheri Markose

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Papers by Kian Lim

2002) Pricing Options Using Implied Trees: Evidence from FTSE-100

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Variations in Credit Spread Term Structures

Optimal Leverage Strategies for Asian REITs

25th Annual European Real Estate Society Conference, 2018

This paper studies the optimal leverage strategies for REITs in three major Asian markets - Hong ... more This paper studies the optimal leverage strategies for REITs in three major Asian markets - Hong Kong, Japan, and Singapore, from 2001 to 2013. REITs are a real-estate-focused investment holding and management companies that are subject to the REIT rules with respect to tax transparency, earning distribution, real estate holding and leverage limit. REITs use relatively less debt than other real estate operating firms, after controlling for agency risks, dividend yields, market risks, and also property sector, country, and year fixed effects. We find that dividend payouts have no effect on the leverage strategies; and the tax ratio increases debt usage of REITs. We also analyse the liquidation costs and business uniqueness effects. We find real estate value to total firm value ratio, as a proxy of liquidation cost, has negative effects on debt ratios for both real estate firms. For the uniqueness reason, REITs with a high concentration of rental revenue stream are more vulnerable to liquidation risks, and thus are more likely to have lower debt ratio.

Understanding the fundamentals of freight markets volatility

Transportation Research Part E: Logistics and Transportation Review, 2019

We analyse empirically the drivers of freight market volatility. We use several macroeconomic and... more We analyse empirically the drivers of freight market volatility. We use several macroeconomic and shipping-related factors that are known to affect the supply and demand for shipping and examine their impact on the term structure of freight options implied volatilities (IV). We find that the level of IVs is affected by the level of the spot rate, the slope of the forward curve, as well as by both demand and supply factors, especially the former. We demonstrate that the relation between the volatility of futures prices and the slope of the forward curve is non-monotonic and convex, that is, it has a V-shape. In general, anticipation of economic growth and of a stronger freight market reduce IV whereas higher uncertainty and anticipation of excess shipping capacity may increase IV. Panel regressions as well as a series of robustness tests produce strong validation of the results.

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Bond rating using support vector machine

Intelligent Data Analysis, 2006

Abstract. This paper deals with the application of support vector machine (SVM) for bond rating. ... more

Intraday information from S&P 500 Index futures options

Journal of Financial Markets, 2019

In this paper we employ intraday transaction prices of liquid E-mini S&P 500 index futures option... more In this paper we employ intraday transaction prices of liquid E-mini S&P 500 index futures options to form 10-minutes ahead risk-neutral skewness forecasts and show profitable options trading strategy net of transaction costs. We do not find profitable trading based on 10-minutes ahead risk-neutral volatility and only very marginal cases of profitable trading using kurtosis forecasts. The skewness profitability anomaly may be an indication of informational market inefficiency in intraday S&P 500 futures options markets, which is contrary to findings using longer-span daily and weekly moments. Our results lend credence to the persistence of intraday trading activities in the markets.

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The effect of taxes on the pricing of defaultable debt

The Journal of Risk, 2004

The objective of this study is to systematically identify the important marine resources used for... more The objective of this study is to systematically identify the important marine resources used for producing traditional medicine for heart disease in Malaysia. To this study, a qualitative method was employed through in a prepared questionnaire. The results indicate that twelve types of marine resources are used for producing traditional medicine for treat indicate that some of the marine resources are used as a food as well as to treat heart disease. Finally, the findings of this study will help demystify traditional medical pra and assist academicians in understanding the Malaysian culture of traditional medicine.

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Estimating Credit Risk Premia

Icfai Journal of Financial Risk Management, 2006

This paper investigates the nature of the credit risk premium adjustments in the Jarrow-Lando-Tur... more This paper investigates the nature of the credit risk premium adjustments in the Jarrow-Lando-Turnbull model of credit risk spreads. The adjustments relate the equivalent martingale measures to the empirical measures of unconditional transition probabilities. We provide a modified version of the risk adjustment that allows a linear partition of the credit spread into an unconditional default component, a recovery component, and the risk premium adjustment. The risk adjustments are related to conditional default risk, illiquidity risk, and other factors not related to recovery effects. The log-transform of these risk adjustments can be specified as linear regressions on a set of macroeconomic variables. Some new insights are gained pertaining to these conditional risks such as a typical upward sloping term structure and sensitivity to short-term Treasury rates and increasing forward rates. The conditional risks appear to be insensitive to market returns.

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Portfolio Hedging and Basis Risk

Applied Financial Economics, 1996

Minimum variance hedged portfolios using futures are formed by taking the linear projection of sp... more Minimum variance hedged portfolios using futures are formed by taking the linear projection of spot price changes onto futures price movements as the hedge ratio. This unwittingly assumes that the underlying spot-futures price movements follow a cointegrated process, given that the spot and the futures prices are integrated processes. If the spot-futures prices are not cointegrated, the hedged portfolio suffers from the risk of potentially large changes in its value. Empirical findings using the Nikkei stock index and the Nikkei 225 futures show this deviation in intraday trading prices. The basis movements which have often been used by intraday traders to predict future price changes, are tested to be mostly unit root processes. This is shown to be due largely to non-cointegration of the spot-futures prices, and suggests why it is profitable to trade futures using basis knowledge only if trading is done on a continual basis.

Predictability of EU Bank Stress Test Results

Global Economy and Finance Journal, 2015

Since the global financial crisis of 2008 and the European sovereign debt crisis of 2009, the ban... more Since the global financial crisis of 2008 and the European sovereign debt crisis of 2009, the banking system in EU and in the Eurozone in particular has been under-performing and weak. The EU bank stress tests were conducted for capital adequacies and to avoid systemic risks. The first test results indicated that of over 120 banks, seven banks failed the stress tests. Spain, with 27 tested banks, made up the biggest portion of the test banks. In this paper we examine using nonlinear LOGIT and PROBIT regression models, the predictability of stress test failures on the sample of Spanish banks, and identify the principal risk factors to watch out for. We find that size, returns performance, and to some extent deposit base are significantly more important than other measures that may be small such as non-interest incomes and other measures that could be fungible such as altering debt durations without materially improve asset qualities or reducing liability servicing capacities. Predictability would enable advance warning and more time for such banks to repair and shape up.

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On the Term Structure of Model-Free Volatilities and Volatility Risk Premium

New Approach to Density Estimation and Application to Value-at-Risk

Journal of Mathematical Finance, 2015

The key contribution in this paper is to provide a new approach in estimating the physical distri... more The key contribution in this paper is to provide a new approach in estimating the physical distribution of the underlying asset return by using a quadratic Radon-Nikodym derivative function. The latter function transforms a fitted Variance Gamma risk-neutral distribution that is obtained from traded option prices. The generality of the VG distribution helps to avoid unnecessary mis-specification bias. The estimated empirical distribution is then used to find the risk measure of VaR. We show that possible underestimation of VaR risk using existing methods is largely not due to VaR itself but perhaps due to mis-specification errors which we minimize in our approach. Our method of measuring VaR clearly captures large tail risk in the empirical examples on S&P 500 index.

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A Generalised Method of Moments Test of the Capital Asset Pricing Model

Investment and Financial Data Analysis

Review of Forex

Estimating Import Demand Functions: The Case of Singapore

A Generalized Method of Moments Test of the Capital Asset Pricing Model

Financial Risk Management and Productivity

Forex

Completing Market with Index Futures and Options

2002) Pricing Options Using Implied Trees: Evidence from FTSE-100

insightful comments that have helped to improve the exposition of this article in significant way... more

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