3 Questions for NYU Stern Prof. David Yermack on Digital Currencies

dyermackDavid Yermack is the Albert Fingerhut Professor of Finance and Business Transformation at the NYU Stern School of Business and is the Director of the NYU Pollack Center for Law and Business. He is co-instructor for the NYU course on Bitcoin and Electronic Currencies. His essay “Is Bitcoin a Real Currency?” was published in The Handbook of Digital Currencies (Elsevier, 2015).

Prof. Yermack will be teaching a 2 day intro to digital currency course at NYU Stern on Nov 9-10, 2015. Learn more and apply today!

1.  How do you think digital currency is disrupting monetary payment systems?

“Companies in the payment processing industry are worth more than $500 billion, led by the big credit card companies such as Visa, MasterCard, and American Express.  The large commercial banks also have significant businesses in international money transfers, and there is a further industry of hardware and software companies such as ATM manufacturers.  All of these firms are vulnerable to the new technology underlying digital currency, which brings major innovations to the way that money is tracked, transferred, and secured.  You are starting to see the major players try to co-opt this technology before it undermines their business models.”

2.  What do you predict is the future of Bitcoin?

“There are about 100,000 Bitcoin transactions every day, and the growth rate is fast.  However, the Bitcoin network has too many bottlenecks and delays to handle worldwide commerce on a large scale, and there is no one who has the authority or responsibility to upgrade it.  So I think Bitcoin is likely to be displaced by successor digital currencies that build on its more clever aspects.  However, it’s not clear that money on a large scale will ever move beyond the control of national governments and be issued by autonomous computer networks, which is what Bitcoin’s creator envisioned.  There are too many macroeconomic problems that could occur if a government could not control its own money supply.”

3.  What should business leaders to be thinking about in terms of Bitcoin?

“Bitcoin relies on a radical change in information technology known as the “blockchain,” and this can be adapted to handle many business transactions involving property registration, self-executing contracts, derivative securities, and so forth.  A lot of organizations are doing research on blockchain applications, and that seems to be where the opportunities lie.”

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Prof. Nouriel Roubini: The Dollar Joins the Currency Wars

nroubiniIn a recent opinion editorial on Project Syndicate, Professor Nouriel Roubini argued that governments shouldn’t use currency wars to boost economic growth. While many central banks around the world have eased monetary policies to jumpstart growth, the US dollar has simultaneously strengthened against both advanced-country commodity exporters and fragile emerging markets.

However, in his op-ed, Professor Roubini warns of the dangers of the US joining the “currency war” to prevent the dollar’s appreciation:

…the US has effectively joined the “currency war” to prevent further dollar appreciation. Fed officials have started to speak explicitly about the dollar as a factor that affects net exports, inflation, and growth.‎ And the US authorities have become increasingly critical of Germany and the eurozone for adopting policies that weaken the euro while avoiding those – for example, temporary fiscal stimulus and faster wage growth – that boost domestic demand.

…Currency frictions can lead eventually to trade frictions, and currency wars can lead to trade wars. And that could spell trouble for the US as it tries to conclude the mega-regional Trans-Pacific Partnership. Uncertainty about whether the Obama administration can marshal enough votes in Congress to ratify the TPP has now been compounded by proposed legislation that would impose tariff duties on countries that engage in “currency manipulation.” If such a link between trade and currency policy were forced into the TPP, the Asian participants would refuse to join.

To read the entire opinion article on Project Syndicate, please click here.

Professor Roubini’s op ed was also covered by The GuardianLivemintMarketWatch and The Wall Street Journal.

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MSRM Professors to Teach in Upcoming Contemporary Finance Executive Short Course

PGB 190x190In an upcoming five day short course beginning June 1st 2015, MSRM Professors Ingo Walter, Edward Altman, Holger Mueller, Viral Acharya, and Stijn Van Nieuwerburgh will join NYU Stern Professors Aswath Damodaran, David Yermack and Baruch Lev to teach Contemporary Finance: Key Topics for Senior Executives and Board Members. Learn more about the course here.

Regulatory and market developments over the past decade have materially raised the bar on the degree of financial expertise demanded of senior managers and board members. Support of this belief can be found in McKinsey & Company’s recently released interview of ADP’s Jan Siegmund on broader expectations of the finance chief’s role.

Contemporary Finance: Key Topics for Senior Executives and Board Members provides an intensive five-day overview of modern Finance at a level that today must be mastered by senior executives and board members of financial and nonfinancial firms.

In this short course, participants will:

  • Acquire and/or update skills in modern financial diagnostics and their application
  • Understand current dynamics of global financial markets and their strategic impact
  • Gain insight into structured finance and its role in creating and destroying value
  • Learn about the new regulatory environment, and how it is likely to evolve going forward
  • Engage in new thinking and evidence on Finance in corporate restructurings
  • Assess new insights in corporate valuation, failure prediction and the cost of capital

If you are interested in attending Contemporary Finance: Key Topics for Senior Executives and Board Members from June 1 – 5, 2015 (Monday – Friday), there are still a limited number of seats available. Applications are still being accepted and should be submitted here.

Please email ExecEd@stern.nyu.edu with any questions. We hope to see you there!

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Prof. Robert Engle Discusses Recent “Flash Crash” Arrest

rengleIn a recent article on Reuters, Professor Robert Engle shared his perspective on the arrest of Navinder Singh Sarao, a UK trader who is though to be responsible for the 2010 “flash crash.” In this crash on May 6th, 2010, almost $1 trillion was temporarily wiped out from U.S. stock markets in minutes.

However, the five years it took to make an arrest shows the difficulty of finding wrongdoing in such fast-paced markets, and suggests that regulators may not be able to detect or prevent future crashes.

“This will raise concerns about the stability of financial markets,” said Robert Engle, finance professor at New York University’s Stern School of Business. “That this trader could put the markets in a tailspin with actions that are hard to detect is bad news.”

To read the entire article on Reuters, please click here.

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Prof. Ian Bremmer Discusses an Opened Cuba

ianbremmerIn a recent opinion editorial on Time, Global Research Professor Ian Bremmer discussed the economic benefits of opening Cuba to international business. Now that Cuba has been removed from the list of nations that sponsor terrorism, several industries will have more advantages in the opened country.

To begin, Prof. Bremmer explained how better relations with Cuba would increase permitted remittance flows. He also discussed an increase in flights and tourism in the country, as Cuba would be a convenient vacation spot for Americans.

Prof. Bremmer also discussed the advantages of opening Cuba in the telecommunications industry:

Only one in ten Cubans regularly use mobile phones and only one in twenty have uncensored access to the Internet. Even state-restricted Internet penetration currently stands at just 23.2%. The telecom infrastructure is so underdeveloped that an hour of regulated Internet connectivity can cost up to 20% of the average Cuban’s monthly salary. There’s serious demand for the major infrastructure investments needed to improve these numbers.

To read more on the economic benefits of an opened Cuba, please click here.

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Class of 2015 Abu Dhabi Module Featured on NYU Stern Homepage

Discover-Possible_Abu-DhabiNYU recently featured the MSRM Class of 2015′s Global and Sovereign Risk Module in Abu Dhabi on the NYU Stern homepage! The feature, as part of a series titled Tales in Possible, discussed the courses, global location, and guest speakers of the module.

John Heywood, a current student in the Class of 2015, also contributed his thoughts on the module in the Middle East:

“Studying in Abu Dhabi was truly a life changing experience for me,” described MSRM student John Heywood, managing director and board member of Rose Rock Group in California. “Together with my classmates, it was a great privilege to be educated by global thought leaders at NYU’s newest world-class campus combined with a unique opportunity to learn about a new country with its rich culture, history and economic growth.”

To read the entire feature, click here.

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Prof. Holger Mueller Examines Corporate Debt on Bloomberg Business

hmuellerMSRM Professor Holger Mueller’s research on corporate debt was featured in an article by Bloomberg Business, titled “Your Company’s Big Appetite For Debt May Be Dangerous To Your Job.” The article discusses the conclusions made by Prof. Mueller and Xavier Giroud of MIT in their recent research on firm leverage and unemployment during the great recession:

“When faced with plunging household demand, leveraged firms ‘do not (or cannot) raise additional external finance’ they write in the paper. ‘Instead, high-leverage firms reduce employment, close down establishments, and cut back on investment.’

‘It’s all about who can weather the storm,’ Mueller said, ‘and that requires money.’ Firms with strong balance sheets were still able to raise cash during the recession. Firms with weak balance sheets had limited financing options and had to cut staff.”

To read the article on Bloomberg Business, please click here.

To read Professor Mueller’s research paper, click here.

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The MSRM Alumni Committee Hosted its First Risk Roundtable Series!

RoundtableOn Wednesday, April 8, 2015, The MS in Risk Management Alumni Committee hosted the First Risk Roundtable Series at NYU Stern School of Business.

The distinguished panel featured Aaron Brown, Chief Risk Officer at AQR (Applied Quantitative Research), Bennett W. Golub, Chief Risk Officer and Co-Head of the Risk & Quantitative Analysis Group at BlackRock and Til Schuermann, Partner in the Finance & Risk and Public Policy Practices at Oliver Wyman. The panel was moderated by NYU Stern Professor, Viral Acharya.

A full room of attendees gathered to discuss current issues on market liquidity risk. The panelists shared their comments about how practitioners and thought leaders are responding to the impact of new regulations on market liquidity. The panels also assessed the impact of the changed market landscape on fund management industry and discussed a framework to monitor and manage market liquidity risk, including key market liquidity risk indicators.

The discussion focused on the problem with the financial system today and the assumption that a price will always exist.  In general, investors buy too much liquidity which historically was under priced but now is fairly priced. The panel concluded that there is room to address systemic risk in the asset management business but one should fairly regulate activities given specific funds may be systemic.  This view is shared by the IMF in its recent Global Financial Stability Report.

Our next public event will be the Third Annual Risk Management Symposium on Saturday, May 30, 2015 and will focus on “Operational Risk in the New Age of Cybersecurity.” Stay tuned for more MSRM events by visiting our website here.

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Prof. Stijn Van Nieuwerburgh to Advise Norway’s Wealth Fund

svnieuweMSRM Professor Stijn Van Nieuwerburgh was recently appointed to an expert group on infrastructure that will advise Norway’s wealth fund. The formation of this group comes from an initiative by Norway’s government, which could potentially open the country’s wealth fund to “invest in infrastructure and to increase its share of real estate to spread risk and boost returns.”

In an article by Bloomberg, Norway’s Finance Minister Siv Jensen was quoted saying, “It’s important to consider the effect on expected returns and risk of opening up for unlisted infrastructure and increasing investments in real estate.”

The expert group will also include Richard Stanton, a professor of finance and real estate at University of California, Berkeley, and Leo de Bever, a former Bank of Canada official and pension fund executive.

To read more about Norway’s process in opening their $880 billion wealth fund to infrastructure, please click here.

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MSRM Alum Andrew Koh to Speak at Cards and Payments Asia 2015 Conference & More

N12220351 KohAndrew Koh, an alum of the Class of 2010 MS in Risk Management Program and the Class of 2008 MS in Global Finance Program, is scheduled to speak at several prestigious conferences this Spring.

On April 22nd and 23rd, Andrew will speak in a round-table discussion on Fraud & Identification at the Cards and Payments Asia 2015 conference, Asia’s largest cards and payments event. The conference will feature 200 speakers, 120 sessions, major cards and payment vendors’ exhibitors, and 10,000+ attendees.

On April 28th and 29th, Andrew will travel to Singapore to speak at Big Data World Show Singapore 2015, which will showcase how to leverage Big Data and Analytics to enhance security using risk management within a technology space. He will present a case study titled “Unlocking the Value of Big Data and Analytics to Increase Security.”

On April 29th, Andrew will also speak at the 2nd E-Crime & Information Security Singapore Summit, one of the most prestigious information security events in South East Asia that represents global business, government, the military and law enforcement agencies. His talk is titled “Are your e-payment systems vulnerable to fraud, money laundering and other financial crimes?”

Finally, on May 5th, he will give a talk at the prestigious Financial Times Mastering AML & KYC 2015 conference in Singapore. He will discuss regulatory risk and compliance risk areas covering Anti-Money Laudering and Know-Your-Customer.

Andrew is a thought leader, risk and governance expert. He has presented to boards, senior management and industry experts from central banks, government agencies, financial institutions and corporations in major conferences. Andrew has almost 25 years working in banking, finance, cards and payment sectors’ risk and governance related roles.

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