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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Prof. Viral Acharya Speaks at Brookings Event on the Federal Reserve

Viral Acharya, NYU SternOn March 2nd, MSRM Professor Viral Acharya spoke about the conflict between the Federal Reserve’s independence in making monetary policies and its expanding role as guardian of financial stability. The talk took place at a Brookings event as part of a conversation about the Federal Reserve’s independence, governance, and accountability.

Other speakers- including Peter Conti-Brown of Stanford/Princeton, the Philadelphia Federal Reserve Bank president Charles Plosser, and Jeremy Stein of Harvard Business School- examined the roles of the presidents of regional Federal Reserve Banks in making monetary policy. The event concluded with a panel discussion on Federal accountability, governance, and its relationship with Congress.

To learn more and read a recap of the Brookings event, please click here.

To watch the entire event on Youtube, please click here.

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Are Equities Overvalued? Prof. Michael Spence Explains in Op-Ed

mspenceIn a recent opinion editorial on Project Syndicate, NYU Stern Professor Michael Spence examined the relationship between rising equity prices and current stock market trends. His editorial included insight on whether stock valuations are excessive relative to future earnings potential, banks’ unconventional monetary policies, and the economy’s equilibrium conditions. In terms of growth patterns,

While expectations of faster earnings growth may well be contributing to elevated P/E levels, the current situation is complicated, to say the least. What is certain is that expectations of high earnings growth would have a more durable positive effect on P/E levels than the suppression of the equity risk premium.

The other important factor affecting P/E is the risk-free rate. As monetary policy normalizes – a process that has already begun in the United States – the risk-free rate is expected to rise to a level that is consistent with stable 2% inflation, which, in turn, corresponds with a level of unemployment. What precisely that rate is, however, remains uncertain – and extremely difficult to determine, given that it is affected by virtually every aspect of the unfolding growth patterns.

To read the entire opinion editorial, please click here.

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Prof. Nouriel Roubini Discusses a Greek Exit from the Euro

nrIn a recent interview with Bloomberg Business, Professor Nouriel Roubini discussed the implications of the “Grexit,” or what the Greek exit from the euro would look like. Professor Roubini described the exit as a “massive contagion” that would highly stress other European banks.

Professor Roubini also examined the geopolitical, financial, and economic damage on the Eurozone, concluding that despite market concerns, “economically and financially, it doesn’t make sense to have a Greek exit.”

To watch the entire interview, please click here.

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Prof. Robert Engle Discusses the NYU Stern Systemic Risk Rankings

Robert Engle NYU SternIn a recent article on the International Business Times, NYU Stern Professor Robert Engle discussed banking stress tests and the NYU Stern Systemic Risk Rankings. Following the first round of the Federal Reserve’s annual stress tests last week- in which an unprecedented 31 major US-based banks were deemed able to continue operating in a deep economic downturn- many analysts raised concerns about whether these tests were diversified enough to predict or prevent the next financial crisis.

Professor Engle, who pioneered a way of measuring the riskiness of individual banks at NYU, explained:

“There are obviously a lot of issues about how you choose the scenarios that you’re going to use. The use of one or two scenarios is a drawback. Other industries, like insurance, use thousands of scenarios.”

In comparison to the Federal Reserve’s banking stress tests, Professor Engle also discussed the NYU Stern Systemic Risk Rankings:

The alternative test Engle and his colleagues have designed provides an example of what a more systemic approach might look like. Dubbed the V-Lab, the process uses publicly available metrics to gauge how individual banks, and their underlying equities, might react to overall shifts in the market.

“We ask, ‘How much is the equity going to fall in the case of a financial crisis?’” Engle said. Since banks hold vast stores of diverse assets, broader market movements correlate with the rise and fall of individual banks. “The amount they go down is a way of measuring how sensitive they are to overall collapse.”

To read the entire article on International Business Times, click here.

To learn more about NYU Stern’s V Lab, please click here.

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Nobel Laureate Robert Engle Delivers Inaugural “Gallatin Lecture Series on Banking”

engle-1NYU Stern Professor and Nobel Laureate Robert Engle delivered the inaugural session of the Gallatin Lecture Series on Banking, the first of four lectures jointly hosted by NYU Stern and The Clearing House. His presentation, titled Prospects for Financial Stability, drew on the work of Stern’s Volatility Lab and explained the varying levels of systemic risk in different countries, relative to GDP and market capitalization.

In his lecture, Professor Engle noted “that it is difficult to test for risk on a forward-looking basis, but showed that the Systemic Risk Ranking results were consistent with what was seen during the 2008 financial crisis, and when applied to banks, provided a rapid and effective alternative to supervisory stress tests to determine strong and weak banks.”

To read more about Professor Engle’s lecture and the new Gallatin Lecture Series on Banking, please click here.

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Prof. Roy Smith Discusses the Impact of Basel III Regulations on the Banking Industry

rsmithIn a recent article on Bankrate, NYU Stern Professor Roy Smith discussed the stabilizing US banking industry, including current threats to the economy, a long-term outlook of the industry, and the impact of several legal regulations. In particular, Professor Smith explained the continued implementation of the Basel III standards- an international agreement that requires large banks to increase the amount of capital they have on hand to cover bad loans- and the construction of a new legal framework under the Dodd-Frank financial reform law in 2014:

“Four years after it was passed, it’s still got a long way to go to be done, but the major parts of it are clear,” Smith says.

Among those major parts are capital requirements that are higher even than those called for in Basel III.

“That’s going to mean that the banks, who already have doubled the amount of capital to meet Basel III, have to add some more and limit other things,” he says.

To read more of Professor Smith’s insights on the banking industry, please click here.

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