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  Issue 15 | Archive ¡¡ May 2013

MFE Alumni Return to RMI as Guest Lecturers

On 7 and 11 March 2013, two distinguished alumni of RMI’s Master of Science in Financial Engineering (“MFE”) program returned to the campus and shared their knowledge with the current MFE cohort by giving two guest lectures.

On 7 March 2013, Mr. Max Wong, Head of VaR Model Testing at Royal Bank of Scotland, gave a lecture on VaR model as part of the module named “Risk Analysis and Management”. A graduate of the MFE program in 2005, Mr. Wong is a risk professional with 17 years of experience in financial industry. His career has covered a rich mix of trading, market analysis, risk management and modeling experiences. Having witnessed two financial crises, one as an “open outcry” trader at Simex (now SGX) during the Asian Financial Crisis in 1998, and the other as a quant risk manager during the financial crisis in 2008, he felt the importance of reviewing VaR models for students.

VaR is the time-honored risk model used under the international Basel risk framework for banks. But the recent global financial crisis has discredited this standard model, as he explained. What really is a VaR model? How does it work in practice? Why does it fail horribly during crises? The philosophical and epistemological reasons the model should never work – black swans and bad assumptions. He opined that the key is to study how to remedy the model so that it can be robust and still be useful for capital buffers during a crisis.


A Big RMI Team Joins JP Morgan Challenge

Following the successful participation in the Singapore JP Morgan Chase Corporate Challenge last year, RMI’s team has grown fast to 13 participants from seven. In particular, there were seven female runners this year, compared to the only one last year. Captained by Dr. Oliver Chen, RMI’s Deputy Director in Education and Industry Relations, the team had scheduled regular training sessions to gear up for the run on 18 April.


Time-varying Rating Standards and the Distorted Incentives of Credit Rating Agencies

A paper by Tao Wang (National University of Singapore)

PhD candidate Tao Wang from the Department of Finance at the National University of Singapore, who is supervised by RMI’s Director, Prof. Duan Jin-Chuan, tests whether reputation concerns could always discipline credit rating agencies in his working paper.

The credit rating agencies (CRAs, henceforth) play an important role as financial intermediations in the modern financial system. However, the CRAs have often been criticized for revealing biased information to the investors. At the heart of these criticisms lies the issuer-pay business model adopted by major CRAs, which means issuers of different securities pay for the credit ratings rather than investors. It has raised concerns that the incentives of the CRAs are distorted, which leads them to issue more favorable ratings to attract/retain clients. In response to the criticisms for their conflicts of interest, the CRAs always defend themselves with a counterargument of having an incentive to build and protect their reputations for being independent and objective. The author thus investigates whether such reputation concerns could serve as a self-disciplining mechanism for rating agencies by studying the time-series pattern of rating standards.


New Staff

Mr. Ang Chung Yuh joined RMI as a Research Analyst on 31 January 2013. He is a Biochemistry graduate with immense passion for financial markets. After earning his Bachelor’s Degree in Biochemistry from Universiti Tunku Abdul Rahman in 2010, he took on an operations position in HSBC while enrolling in the CFA Program to equip himself with skills and knowledge pertaining to financial analysis and investments valuation. Ever since being exposed to the Benjamin Graham school of thought, Chung Yuh has been developing himself in the art of fundamentals-driven securities analysis and on understanding the elusive concept of investment risks. Leisure for Chung Yuh usually means movies, reading and music.

On 4 February 2013, Ms. Lu Yin joined RMI as a Research Analyst. She came to Singapore from northern China in 2002. She received her Bachelor degree in Physics in 2008 from National University of Singapore (NUS), and is about to receive her PhD degree in Integrative Sciences and Engineering from NUS for specialized theoretical quantum information and cold atoms. She wishes to apply her quantitative analysis skills to solving real-life problems. Over the years, she has developed interests in the global economy and financial markets. In her spare time, she loves taking photos, creating music, diving and traveling.

Mr. Thomas Cho joined RMI on 8 April 2013 as an Associate Director, Research Communications from Channel NewsAsia, where he was a senior producer/journalist in business and financial news. Prior to his experience in broadcast journalism, he spent about 6 years overseas as a China bureau chief of a shipping newspaper, Tradewinds, in Shanghai and as an Associate Director in the Seoul office of Tullett Prebon, an interdealer broker, on Korean interest rate swap, cross currency swap and bond broking. With more than 10 years in journalism and financial markets, Thomas has covered many stories in-depth such as the Fraser and Neave takeover war, Singapore’s integrated resorts bidding process and Muddy Waters versus Olam on the issue of pricing unharvested agricultural commodities. In his free time, Thomas attends training in Muay Thai.



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Availability of CRI¡¯s CVI Data

March 2013

Starting in March 2013, the Corporate Vulnerability Index (CVI) data from RMI¡¯s Credit Research Initiative has been carried by two different third party data providers, namely, Bloomberg and Russia-based Cbonds.

Bloomberg Terminal users can access RMI CVI data by typing RMII <GO>. Separately, Cbonds, a Russian financial information site specializing in fixed income markets, announced on 20 March the start of their publication of RMI CVI data. They believe that as the CVIs are stress indicators, the development of derivative instruments (futures, swaps, options) based on CVIs could possibly be used for crisis hedging. Cbonds subscribers can access the CVI data at http://em.cbonds.com/indexes/banks/


RMI Research Seminars

12 April 2013

On 12 April, Professor Eckhard Platen, Chair in Quantitative Finance at the University of Technology Sydney, presented his paper entitled ¡°Approximating the Numeraire Portfolio for Investing, Pricing and Hedging¡± at RMI¡¯s Research Seminar.

Together with his co-author, he proposed an alternate approach to portfolio optimization. The use of naive diversification allows them to approximate the numeraire portfolio (NP). The NP is the ¡°best¡± performing portfolio in the sense that it is the strictly positive portfolio that, when used as benchmark, makes all benchmarked nonnegative portfolios to be supermartingales. He then employed proxies of the NP for pricing long dated derivatives under the benchmark approach.



RMI Co-organizes Workshop with NVIDIA

23 April 2013

On 23 April, RMI co-organized the GPU Technology Workshop Singapore 2013 with NVIDIA, a visual computing solution provider which has expanded into super-, mobile and cloud computing. At the workshop which targeted quantitative analysis professionals, IT managers, researchers and developers in the finance industry, Dr. Oliver Chen, RMI¡¯s Deputy Director in Education & Industry Relations gave a presentation.



Workshop in Counterparty Credit Risk & CVA in Practice
8 – 9 July 2013

Seventh Annual Risk Management Conference
11 – 12 July 2013

15 – 19 July 2013

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Published quarterly by Risk Management Institute, NUS
Editor: Ivy Wang (rmiwy@nus.edu.sg)