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Quantitative Finance & Risk Analytics Workshop

Rensselaer Polytechnic Institute, Troy, N.Y.

Registration Will Open on March 30
 

In this one-day workshop, hosted by the Center for Financial Studies (CFS) at the Lally School of Management at Rensselaer Polytechnic Institute, attendees will learn and network with top academics and industry experts in the financial industry, specifically in the areas of quantitative investments and risk management. Learn how the best in the business do things and get updated on state-of-the-art academic research and best practices in the financial field. 
 
The day will include presentations and panel discussions on several broad themes. Attendees will receive a variety of perspectives and insights on some of the current critical issues in the financial industry.

Event Details

Agenda

TIME EVENT
8:00 - 8:40 a.m.        Breakfast
8:40 - 9:00 a.m. Welcome and Introductions
9:00 - 10:15 a.m.

Plenary Speaker: Professor Stavros A. Zenios, Professor of Finance and Management Science, University of Cyprus, Business Economics and Public Policy Department, Wharton School of Business (USA) and Norwegian School of Economics

Topic: Financial Innovation for Sovereign Debt Management in Crisis Countries

Abstract: An old idea was revived at the G20 leaders meeting in Chengdu, China, in July 2016: issuing contingent debt for sovereigns. The International Monetary Fund was asked to analyze the ``technicalities, opportunities, and challenges of state contingent debt instruments" and report back within a year. We use portfolio optimization theory to do two things. First, price two types of contingent contracts, namely GDP-linked bonds and sovereign contingent convertible bonds (S-COCO) with an automatic standstill. Second, to show how a sovereign’s debt risk profile can improve when financed using contingent debt. We use the developed pricing and risk optimization models to compare the two types of instruments in order to understand which one may be preferable and under what conditions. The G20 emphasized GDP-linked bonds in its mandate to IMF, but S-COCO deserve some serious discussion too. Another innovation of the risk optimization model is that it allows us to jointly optimize debt stock and gross financing decisions for a sovereign, and identify the hot spots of unsustainable debt in crisis countries. We illustrate with publicly available data for Greece as a case study. 

10:15 - 10:30 a.m. Coffee Break
10:30 - 11:45 a.m.

Plenary Speaker: Professor Andreea C. Minca, Andrew Schultz '36 Ph.D. '41, Sesquicentennial Fellow, Operations Research and Information Engineering, Cornell University, Ithaca, N.Y.

Topic: Systemic Risk and Central Clearing Counterparty Design

Abstract: I will examine the effects on a financial network of multilateral clearing via a central clearing counterparty (CCP) from an ex ante and ex post perspective. The CCP is capitalized with equity and a guarantee fund and it can charge a volume-based fee. We propose a CCP design which improves aggregate surplus, and reduces banks' liquidation and shortfall losses. We characterize the CCP's equity, fee, and guarantee fund policies that reduce systemic risk and are incentive compatible for banks. A simulation study based on aggregate market data shows that central counterparty clearing can reduce systemic risk and improve banks' utility.

11:45 a.m. - 1:00 p.m. Lunch
1:00 - 2:15 p.m.

Plenary Speaker: Professor Anna Chernobai, Associate Professor Finance, Martin J. Whitman School of Management, Syracuse University, Syracuse, N.Y. 

Topic: Business Complexity and Risk Management: Evidence from Operational Risk Events in U.S. Bank Holding Companies

Abstract: Recent regulatory proposals tie the systemic importance of a financial institution to its complexity. However, we know little about how complexity affects a bank’s behavior, including its risk management. Using the gradual deregulation of banks’ nonbank activities during 1996–1999 as a natural experiment, we show that the frequency and magnitude of operational risk events in U.S. bank holding companies have increased significantly with their business complexity. This trend is particularly strong for banks that were bound by regulations beforehand, especially for those with an existing Section 20 subsidiary, and weaker for the other banks that were not bound and for nonbank financial institutions that were not subject to the same regulations to begin with. These results reveal the darker side of post-deregulation diversification, which in earlier studies has been shown to lead to improved earnings performance. We use operational risk events as a risk management measure because (i) the timing of the origin of each event is well identified, whereas actual balance sheet losses can take years to materialize, and (ii) the risk events can serve as a direct measure of materialized failures in risk management without being influenced by the confounding factors that drive asset prices, such as implicit government guarantees. Our findings have important implications for the regulation of financial institutions deemed systemically important, a designation tied closely to their complexity by the Bank for International Settlements and the Federal Reserve.

2:15 - 2:30 p.m. Coffee Break
2:30 - 3:45 p.m.
Plenary Speaker: Professor Nikunj Kapadia, Professor Finance, Isenberg School of Management, University of Massachusetts, Amherst, Mass.
 
 
Topic: Indexing Market Risk Using Option Prices
 
Abstract: The growth and popularity of the CBOE’s VIX index suggests that option prices are uniquely suited to generate measures of market risk. In this talk, I show how to construct volatility and tail index from option prices. Both indexes are model-free, and can be constructed using portfolios of options. The volatility index improves upon the VIX as it is unbiased in the presence of jump risk or discontinuities. The jump index can be used to distinguish between upside and downside risk. Both indexes are useful in predicting one-year ahead returns in the aftermath of the financial crisis.  Finally, I consider why option markets are successful in aggregating risk, and how to construct an early warning system using anomalies in the option market.
3:45 - 5:00 p.m.

Industry Panel Discussion: Charles Brown, Hugh Johnson Advisors, LLC (Three additional speakers to be announced)

Topic: Challenges in Investments and Debt Management

5:00 - 5:15 p.m. Closing Remarks
5:15 - 6:00 p.m. Networking and Student Interactions
6:00 - 9:30 p.m. Dinner at Pat's Barn, Rensselaer Tech Park - Bus leaves at 6 p.m. and 6:30 p.m.

 

Speakers

Plenary Speakers:
  • Professor Anna Chernobai, Associate Professor Finance, Martin J. Whitman School of Management, Syracuse University, Syracuse, N.Y. 
  • Professor Nikunj Kapadia, Professor Finance, Isenberg School of Management, University of Massachusetts, Amherst, Mass.
  • Professor Andreea C. Minca, Andrew Schultz '36 Ph.D. '41, Sesquicentennial Fellow, Operations Research and Information Engineering, Cornell University, Ithaca, N.Y.
  • Professor Stavros A. Zenios, Professor of Finance and Management Science, University of Cyprus, Business Economics and Public Policy Department, Wharton School of Business (USA) and Norwegian School of Economics
 
Industry Panel Speakers:
  • Charles Brown, Hugh Johnson Advisors, LLC
  • Three additional speakers - To Be Announced

 

Venue and Directions

Center for Biotechnology and Interdisciplinary Studies, Howard Isermann ’42 Auditorium
Rensselaer Polytechnic Institute, Troy Campus

1623 15th St, Troy, N.Y. 12180

Get Directions Here