Svetlozar Rachev Explained

Svetlozar (Zari) Todorov Rachev is a professor at Texas Tech University who works in the field of mathematical finance, probability theory, and statistics. He is known for his work in probability metrics, derivative pricing, financial risk modeling, and econometrics. In the practice of risk management, he is the originator of the methodology behind the flagship product of FinAnalytica.

Life and work

Rachev earned a MSc degree from the Faculty of Mathematics at Sofia University in 1974, a PhD degree from Lomonosov Moscow State University under the supervision of Vladimir Zolotarev in 1979, and a Dr Sci degree from Steklov Mathematical Institute in 1986 under the supervision of Leonid Kantorovich, a Nobel Prize winner in economic sciences, Andrey Kolmogorov and Yuri Prokhorov.^[1] Currently, he is Professor of Financial Mathematics at Texas Tech University.^[2]

In mathematical finance, Rachev is known for his work on application of non-Gaussian models for risk assessment, option pricing, and the applications of such models in portfolio theory.^[3] He is also known for the introduction of a new risk-return ratio, the "Rachev Ratio", designed to measure the reward potential relative to tail risk in a non-Gaussian setting.^{[4] [5] [6]}

In probability theory, his books on probability metrics and mass-transportation problems are widely cited.^[7]

FinAnalytica

Rachev's academic work on non-Gaussian models in mathematical finance was inspired by the difficulties of common classical Gaussian-based models to capture empirical properties of financial data.^{[3] [4]} Rachev and his daughter, Borjana Racheva-Iotova, established Bravo Group in 1999, a company with the goal to develop software based on Rachev's research on fat-tailed models. The company was later acquired by FinAnalytica.

Awards and honors

• Fellow of the Institute of Mathematical Statistics^[8]
• Humboldt Research Award for Foreign Scholars (1995)^[9]
• Honorary Doctor of Science at Saint Petersburg State Institute of Technology (1992)^[10]
• Foreign Member of the Russian Academy of Natural Sciences^[11]

Selected publications

Books

• Book: Rachev. S.T.. Probability Metrics and the Stability of Stochastic Models. 1991. Wiley. New York. 978-0471928775.
• Book: Rachev. S.T.. Rueschendorf. L.. Mass Transportation Problems, Vol I: Theory. 1998. Springer. 978-1475785258.
• Book: Rachev. S.T.. Rueschendorf. L.. Mass Transportation Problems, Vol II: Applications. 1999. Springer. 978-0387983523.
• Book: Rachev. S.T.. Mittnik. S.. Stefan Mittnik. Stable Paretian Models in Finance. 2000. Wiley. 978-0471953142.
• Book: Rachev. S.T.. Kim. Y.. Bianchi. M.L.. Fabozzi. F.J.. Frank J. Fabozzi. Financial Models with Levy Processes and Volatility Clustering. 2011. Springer. New York. 978-0470482353.
• Book: Rachev. S.T.. Klebanov. Lev. Stoyanov. S.V.. Fabozzi. F.J.. Frank J. Fabozzi. The Methods of Distances in the Theory of Probability and Statistics. 2013. Springer. 978-1461448686.

Articles

• Rachev. S.T.. Sengupta. A.. Laplace-Weibull mixtures for modelling price changes. Management Science. 1993. 39. 8. 1029–1038. 10.1287/mnsc.39.8.1029.
• Mittnik. S.. Stefan Mittnik. Rachev. S.T.. Modeling asset returns with alternative stable distributions . Econometric Reviews. 1993. 12. 3. 261–330. 10.1080/07474939308800266 .
• Mittnik. S.. Stefan Mittnik. Paollela. M.. Rachev. S.T.. Diagnosing and treating the fat tails in financial returns data. Journal of Empirical Finance. 2000. 7. 3–4. 389–416. 10.1016/S0927-5398(00)00019-0.
• Mittnik. S.. Stefan Mittnik. Paollela. M.. Rachev. S.T.. Stationarity of stable power-GARCH process. Journal of Econometrics. 2002. 106. 1. 97–107. 10.1016/S0304-4076(01)00089-6.
• Biglova. A.. Ortobelli. S.. Rachev. S.T.. Stoyanov. S.V.. Different Approaches to Risk Estimation in Portfolio Theory. Journal of Portfolio Management. 2004. 31. 1. 103–112. 10.3905/jpm.2004.443328.
• Stoyanov. S.V.. Rachev. S.T.. Fabozzi. F.J.. Frank J. Fabozzi. Optimal financial portfolios. Applied Mathematical Finance. 2007. 14. 5. 401–436. 10.1080/13504860701255292.
• Bierbrauer. M.. Menn. C.. Rachev. S.T.. Türck. S.. Spot and derivative pricing in the EEX power market. Journal of Banking & Finance. 2007. 31. 11. 3462–3485. 10.1016/j.jbankfin.2007.04.011.
• Stoyanov. S.V.. Rachev. S.T.. Racheva-Iotova. B.. Fabozzi. F.J.. Frank J. Fabozzi. Fat-tailed models for risk estimation. Journal of Portfolio Management. 2011. 37. 2. 107–117. 10.3905/jpm.2011.37.2.107. 10419/45631. free.

External links

• A definition of the Rachev Ratio
• FinAnalytica Inc

Notes and References

1. Web site: Meet the team. www.finanalytica.com. FinAnalytica. 15 August 2015.
2. Web site: Department of Mathematics & Statistics. 31 December 2017.
3. News: Baird. Jane. Assessing the risk of a cataclysm. Reuters. May 25, 2009. 2009-05-25.
4. Web site: Fehr. Benedikt. Beyond the Normal Distribution. Frankfurter Allgemeine Zeitung. 16 March 2006.
5. Cheridito. P.. Kromer. E.. Reward-Risk Ratios. Journal of Investment Strategies. 2013. 3. 1. 3–18. 10.21314/JOIS.2013.022.
6. Farinelli. S.. Ferreira. M.. Rossello. D.. Thoeny. M.. Tibiletti. L.. Beyond Sharpe ratio: Optimal asset allocation using different performance ratios. Journal of Banking and Finance. 2008. 32. 10. 2057–2063. 10.1016/j.jbankfin.2007.12.026.
7. Book: Villani. Cedric. Optimal Transport: Old and New. limited. 2009. Springer. 978-3-540-71050-9. 9, 236,41–43,80,93,161–163,409.
8. Web site: Honored IMS Fellows. Institute of Mathematical Statistics. 13 August 2015. dead. https://web.archive.org/web/20140302125855/http://www.imstat.org/awards/honored_fellows.htm. 2 March 2014.
9. News: Humboldt Awards Announced. 13 August 2015. 5. American Mathematical Society. May 1995. Notices of the AMS. Foundation. Humboldt. 42.
10. Web site: Honorary Doctors and Distinguished Alumni. St. Petersburg Technical University. 13 August 2015.
11. Web site: Stable Paretian Models in Finance: Author Information. www.wiley.com. Wiley. 15 August 2015.