Professor Viral Acharya on China’s Debt Fueled Growth Slowdown

 

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Professor Ingo Walter’s Research on Investment Management Technology is Highlighted

The following is an excerpt from The Wall Street Journal: 

iwalterSystems prohibit timely launches of new investment products and hinder firms from keeping pace with regulatory demands and innovation

SimCorp, a leading provider of investment management solutions and services for the global financial services industry, has published a new white paper, titled “Catalyst or Catastrophe: The Impact of IT Systems on Sustainable Business Performance.” The paper, authored by Ingo Walter, Seymour Milstein Professor of Finance, Stern School of Business, New York University, is part of an ongoing series of industry thought leadership compiled and published by SimCorp.

In the paper, Walter draws from a multitude of recent research to establish the clear relationship between the state of a firm’s investment management technology and its future business health. IT infrastructure, Walter writes, has emerged as a major source of competitive advantage in today’s product-saturated, high volatility and low return atmosphere.

Read the entire article in The Wall Street Journal.

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Webinar: Does Risk Management Matter to Shareholders? An Analysis of the Value of Risk Management

yvette connorPresented by: Yvette Connor, NYU Stern MS in Risk Management, Class of 2013 & Managing Director – Risk Management Advisory Services at Alvarez & Marsal LLC

Date: Tuesday, March 11th, 2014

Time: 11:00 am Eastern Standard Time (EST)

To Register: https://www3.gotomeeting.com/register/803293662

NYU Stern MS in Risk Management Program proudly presents Yvette Connor, NYU Stern MS in Risk Management Class of 2013 & Managing Director – Risk Management Advisory Services at Alvarez & Marsal LLC. In this webinar, Yvette will be presenting her final capstone presentation: Does Risk Management Matter to Shareholders? An Analysis of the Value of Risk Management. The capstone project is a group project that works as a practical application of the curriculum taught throughout the year and presented at the culmination of the program.

Though not a new concept to either industry and academia, the discipline of risk management has gained in prevalence since the global financial crisis of 2008, during which time examples of perceived “poor” risk management were on display in abundance. This webinar seeks to ascertain whether or not there is value in “good” risk management; whether or not that value is recognized (and reaped) by shareholders; and, finally, whether or not that value can be quantified.

Building upon the existing body of research and the established analytical frameworks for testing and assessing the value of risk management, this webinar illustrates the relatively recent shift in focus among researchers and risk practitioners alike from traditional risk management strategies (e.g. hedging, insurance, etc.) to more holistic, enterprise-wide risk management programs. We will address the challenges inherent in identifying firms with “good” risk management and those without “good” risk management and evaluate the various methods for making such determinations; that is, through the use of surveys, industry research, corporate filings and the like.

We will ultimately arrive at the conclusion that a corporate culture emphasizing sustainability may be considered a reasonable proxy for firms with “good” risk management.

If you have any questions about the webinar or program, please do not hesitate to reach out to us at 212-998-0442 and msrm@stern.nyu.edu

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Inflation Risk Premium Implied by Options

mbrennerMSGF Academic Director and NYU Stern Professor Menachem Brenner along with his co-authors, Yoram Landskroner, Eddy Azoulay and Roy Stein of the Bank of Israel, explore how to measure expected inflation – a critical issue facing the Central Bank. One of the commonly used estimates of expected inflation is the yield differential between nominal bonds and inflation-indexed bonds (breakeven inflation). Breakeven inflation is, however, a biased estimate of expected inflation because it includes an inflation risk premium (IRP). Using a new approach, the authors estimate the IRP using the volatility implied from foreign exchange (FX) option prices combined with a price of risk extracted from stock prices. Purchasing Power Parity theory provides the linkage between inflation and the foreign exchange rate. Using data from the Israeli government bond market, which has a long history of liquid markets in inflation-linked and nominal bonds as well as an active FX options market, they find a statistically and economically significant positive inflation risk premium.

Read Professor Brenner’s entire paper here.

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MSRM Alum, Andrew Koh, to Speak at 5th Annual World Cards & Payments Summit

N12220351 KohMS in Risk Management Class of 2010 and MS in Global Finance Class of 2008 alum, Andrew Koh, will speak at this years 5th Annual World Cards & Payments Summit on February 10-12, 2014 in Dubai.

His topic of discussion will be on “Transforming your Enterprise’s Risk Management Framework”. It centers on real challenges involved in implementing an Enterprise Risk Management within financial institutions and the real takeaways through lessons learned and discussions with participants.

Andrew Koh is the Vice President and Head of Enterprise Risk Management for NETS Singapore, He is in charge of managing the group enterprise risk management policies, procedures and framework. He facilitates the use of group risk methodologies and risk tools throughout the organization, tailoring and conducting specialized ERM group wide training programs for NETS staff.

Visit the conference website here for more information.

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Is Bitcoin a Real Currency?

dyermackNYU Stern Professor David Yermack examines Bitcoin’s historical trading behavior to determine whether or not it behaves like a traditional sovereign currency. He finds that Bitcoin’s exchange rate volatility is greater than the volatilities of widely used currencies, undermining Bitcoin’s usefulness as a unit of account or a store of value. Additionally, he finds that Bitcoin’s daily exchange rates exhibit virtually no correlation with bona fide currencies, which he argues makes Bitcoin useless for risk management purposes and difficult for its owners to hedge. Bitcoin also lacks access to a banking system with deposit insurance, and is not used to denominate consumer credit or loan contracts. Overall, he concludes that Bitcoin appears to behave more like a speculative investment than like a currency.

Download his paper here.

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NYU Stern Prof. Nouriel Roubini on Emerging Markets

The following is an excerpt from CNBC:

roubiniWhile the “Fragile Five” – India, Indonesia, Brazil, Turkey and South Africa – have been among the hardest hit amid the turmoil in emerging markets, famed economist Nouriel Roubini says the threat of a full-fledged currency, sovereign-debt and banking crisis remains low.

“All have flexible exchange rates, a large war chest of reserves to shield against a run on their currencies and banks and fewer currency mismatches (for example, heavy foreign-currency borrowing to finance investment in local-currency assets),” Roubini, nicknamed Dr. Doom for his generally bearish views, wrote in an op-ed on the Project Syndicate website on Friday.

“Many also have sounder banking systems, while their public and private debt ratios, though rising, are still low, with little risk of insolvency,” he said.

Roubini, a professor at New York University’s Stern School of Business and chairman of Roubini Global Economics, said optimism around emerging markets is “probably correct” given robust medium-term fundamentals in most including urbanization, industrialization and the rise of a consumer society.

Read the entire article on CNBC.

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NYU Stern Prof. Lawrence White on Secondary Mortgage Markets

The following is an excerpt from The New York Times: lwhite

The president’s State of the Union address on Tuesday provided a glimmer of hope for those looking for action to revamp America’s mortgage system.

In a brief nod in the address, and in an elaboration of his proposals posted on the White House’s website, President Obama reiterated his commitment to fixing the system’s problems, albeit at the end of a long list of executive actions that focused on job creation, immigration reform and other domestic issues.

“Since the most important investment many families make is their home,” Mr. Obama said on Tuesday night, “send me legislation that protects taxpayers from footing the bill for a housing crisis ever again, and keeps the dream of home ownership alive for future generations.”

The White House document further outlined a plan to end the business model of the mortgage finance giants Fannie Mae and Freddie Mac and ensure widespread access to mortgages. “The president has made clear that it is time to turn the page on an era of reckless lending and taxpayer bailouts, and build a new housing finance system that will provide secure home ownership for responsible middle class families and those striving to join them,” the document said.

___

“There’s one view that says the secondary mortgage market would not be able to recreate itself without some government entity” like the Federal Mortgage Insurance Corporation “being there as a backstop,” said Lawrence White, an economics professor at New York University’s Stern School of Business. “The House view is, let’s just get Fannie and Freddie out of there and the mortgage markets will take care of themselves just fine.”

Read the full article in the New York Times here.

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Professor Viral Acharya’s Research on European Banks is Highlighted

The following is an excerpt from Bloomberg News:

Viral Acharya, NYU SternEuropean banks have a capital shortfall of as much as 767 billion euros ($1 trillion) before the European Central Bank’s probe into the financial health of the region’s lenders, according to a study.

French banks show the biggest gap of 285 billion euros, followed by German lenders with as much as 199 billion euros, Sascha Steffen of the European School of Management and Technology in Berlin and Viral Acharya at New York University said in their study dated Jan. 15. The figures assume a benchmark capital ratio for other book measures of leverage of 7 percent, they wrote.

“A comprehensive and decisive AQR will most likely reveal a substantial lack of capital in many peripheral and core European banks,” the authors wrote, referring to the central bank’s Asset Quality Review stage of the Comprehensive Assessment.

The Frankfurt-based ECB is conducting a three-stage assessment of bank assets before it assumes oversight of about 130 lenders across the 18-member currency bloc this November. Steffen and Acharya examined 109 of the 124 euro-area banks that will be part of the AQR, including Deutsche Bank AG (DBK), Credit Agricole (ACA) SA, BNP Paribas SA (BNP) and Banco Santander.

The authors see particularly high risks among German state-owned banks, or Landesbanken. “Germany has many government-owned institutions that may require capital issuances and/or bail-ins,” they wrote.

Read the entire Bloomberg News article.

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Michael Spence: The Real Challenges to Growth

The following is an op-ed written by NYU Stern Professor and Nobel Laureate in Economics, Michael Spence, published in Project Syndicate:

mspenceMILAN – Advanced economies’ experience since the 2008 financial crisis has spurred a rapidly evolving discussion of growth, employment, and income inequality. That should come as no surprise: For those who expected a relatively rapid post-crisis recovery, the more things stay the same, the more they change.

Soon after the near-collapse of the financial system, the consensus view in favor of a reasonably normal cyclical recovery faded as the extent of balance-sheet damage – and the effect of deleveraging on domestic demand – became evident. But, even with deleveraging now well under way, the positive effect on growth and employment has been disappointing. In the United States, GDP growth remains well below what, until recently, had been viewed as its potential rate, and growth in Europe is negligible.

Employment remains low and is lagging GDP growth, a pattern that began at least three recessions ago and that has become more pronounced with each recovery. In most advanced economies, the tradable sector has generated very limited job growth – a problem that, until 2008, domestic demand “solved” by employing lots of people in the non-tradable sector (government,

Read the entire article on Project Syndicate

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