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  Issue 23 | Archive May 2015

Columbia Business School's Professor Paul Glasserman Shares His Research on Contingent Capital

On 13 April 2015, Professor Paul Glasserman, Jack R. Anderson Professor of Business at the Columbia Business School, gave a talk on contingent capital at NUS-RMI. Nearly 50 attendees were present to learn about the role of contingent convertible (cocos) bonds and bail-in debt as a way of averting disorderly bankruptcy. The audience at the seminar were a mix of professionals from various banking and financial institutions, NUS researchers, and students and alumni from RMI's Master of Science in Financial Engineering (MFE) program.

Titled "Contingent Capital, Tail-Risk, and Debt-Induced Collapse," the talk shed light on the research conducted by Prof. Glasserman together with Prof. Nan Chen, Behzad Nouri, and Markus Pelger. In their research they have investigated coco bonds and their incentive effects on the issuing firm. Adding to previous research on the topic they also developed a new structural model with endogenous default, debt rollover, and tail risk in the form of downward jumps in asset value.

Since the financial crisis, research has been focused on crisis management tools in the banking industry, like cocos. Stating that Contingent Capital is a proposed solution to the recent financial crisis, Prof. Glasserman, who is also the Research Director of the Program on Financial Studies at Columbia University, noted, "If banks have mechanisms, like cocos, in place, government bailouts become less likely." Following a short introduction, he went into detail about the nature of cocos as debt that converts to equity when a bank is approaching financial distress.


IMF Advisor Daniel Hardy Talks Design, Interpretation, and Limits of Stress Testing

On 2 April 2015, Dr. Daniel Hardy, Advisor at the International Monetary Fund (IMF), gave a talk on "Design, Interpretation and Limits of Stress Testing: An IMF Perspective." The talk was organized for the MFE students and alumni to give them a better understanding of stress testing as a tool of financial surveillance. The interest of the students was reflected in their attendance, as 55 students were present to hear Dr. Hardy discuss the various aspects of stress testing in today's financial environment.

Prof. Marc Paolella Discusses Large-Scale Portfolio Optimization

On 17 April 2015, Prof. Marc Paolella gave a talk on the research conducted by him and his fellow researchers, which focused on large-scale portfolio optimization. The talk was held at RMI for an audience of around 40 RMI students and faculty. Titled "Portfolio Selection with Active Risk Monitoring," the seminar gave the audience an insight into how risk monitoring of the optimal portfolio can provide early warning system against large market risk.


A General Framework for Pricing Asian Options Under Markov Processes

A paper by Ning Cai (The Hong Kong University of Science and Technology), Steven Kou (National University of Singapore), and Yingda Song (University of Science and Technology of China)

RMI's Director Prof. Steven Kou, who is also the Provost's Chair Professor of Mathematics at NUS, wrote a paper with his co-authors Prof. Ning Cai and Dr. Yingda Song titled, "A General Framework for Pricing Asian Options under Markov Processes." The paper is set to appear in the Operations Research in 2015.

Asian options, whose payoffs are contingent on the arithmetic average of the underlying asset prices over a pre-specified period, are among the most popular path-dependent options that are actively traded in the financial markets. The average of the underlying asset prices can be computed either discretely, for which the average is taken over the asset prices at discrete monitoring time points, or continuously, for which the average is calculated via the integration of asset prices over the monitoring time period. The valuation of Asian options is challenging since the arithmetic average usually does not have a simple distribution.


New Staff

Phang Ian Cher Shen joined RMI as a Research Associate on 3 March 2015. He is a seasoned investment management professional in investment advisory and asset management. Over the span of 20 years, he has managed both private and public listed investment holding firms, as well as registered fund managers under the purview of the Monetary Authority of Singapore (MAS). An ex-Merrill Lynch banker, Ian is experienced in private equity, portfolio management, and asset allocation. Prior to joining RMI, Ian was a Director of a Global Investment Program Private Equity Fund - a Government approved PE fund in Singapore.

Visitor

Prof. Paul Glasserman visited RMI from 13 to 17 April 2015. Paul Glasserman is the Jack R. Anderson Professor of Business at Columbia Business School, where he serves as Research Director of the Program on Financial Studies. His research interests include risk management, financial stability, and Monte Carlo methods. From 2011 to 2012, he was on leave from Columbia, working at the Office of Financial Research (OFR) in the U.S. Treasury Department, where he currently serves as a part-time consultant.



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CRI Coverage Expansion

12 January 2015

Between November 2014 and January 2015, RMIí»s Credit Research Initiative (CRI) coverage of credit risk measures has been expanded to 116 economies, as a result of the inclusion of stock exchanges in Oman, Jamaica, Bangladesh, Bosnia and Herzegovina, Montenegro, Serbia, and Tunisia.


RMI & CFA Society Singapore Joint Talk

3 February 2015

On 3 February 2015, Professor Steven Kou, Director of RMI, held a professional development lecture at the Capital Towers on Robinson Road. Titled "Science of Money" the talk focused on three aspects of the way scientific method could be applied to finance: Investments, derivatives, and risk management.


RMI Research Seminars

19 & 24 March 2015

In March 2015, RMI organized two research seminars by professors from NUS and Singapore Management University (SMU). On 19 March, Dr. Zsuzsa Huszar, Assistant Professor at NUS Business School and RMI affiliated researcher, discussed her research and the new empirical evidence which suggests that concentrated short sales convey both industry information and firm-specific information.


Long Service Award

March 2015

Norhayati Kum, RMI's Management Assistant Officer for the MFE Program, received an award from RMI for 15 years of service. The award was presented to Norhayati by Prof. Steven Kou, Director of RMI.




Financial Risk Manager (FRM®) Certification Training Program 2015
29 May to 17 Oct 2015

Singapore-Suzhou Workshop on Quantitative Finance
12 & 13 July 2015

Ninth Annual Risk Management Conference
30 & 31 July 2015

NUS RMI Specialist Diploma in Credit Risk Management - Corporate Banking
15 June to 14 Aug 2015

4 July to 12 Sept 2015

Workshop in Anti-Money Laundering and Model Risk Management
Aug 2015

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Published quarterly by Risk Management Institute, NUS
Editor: Shivani Nakhare (rminsr@nus.edu.sg)