The Sixteenth Annual Risk Management Conference, a premier event orchestrated by the NUS Risk Management Institute (RMI), unfolded at Conrad Centennial Singapore, on 31 July 2023. This exclusive congregation of distinguished academics, industry luminaries, and thought leaders from the spheres of risk management and finance convened to unravel the latest paradigms and pioneering methodologies in risk evaluation and strategic management. This pivotal conference spanned a comprehensive day-long itinerary, characterized by a diverse array of illuminating sessions, keynote addresses, and illuminating panel discussions.

The conference was inaugurated with a gracious welcome and enlightening introductory remarks by the esteemed Prof. Yi-Chun Chen, the Director of the illustrious NUS Risk Management Institute. Prof. Chen extended his heartfelt appreciation to the International Association of Credit Portfolio Managers (IACPM) for their invaluable collaboration in crafting this intellectual fiesta. He provided a comprehensive overview of the conference’s progression over the years, underscoring its pivotal role in advancing the frontiers of risk management knowledge. He also took the opportunity to introduce the audience to the RMI’s multifaceted endeavours, including the avant-garde Master of Science (Financial Engineering) Program, and shed light on the institute’s ongoing research ventures.

A monumental highlight of this congregation was the spellbinding keynote address delivered by Nobel Laureate Prof. Lars Peter Hansen, David Rockefeller Distinguished Service Professor in Economics, Statistics, Booth School of Business, University of Chicago. Prof. Hansen is a leading expert in economic dynamics who works at the forefront of economic thinking and modeling, drawing approaches from macroeconomics, finance, and statistics. The mantle of introducing Prof. Hansen was conferred upon Prof. Neng Wang, an erudite scholar holding the Chong Khoon Lin Professor of Real Estate and Finance position at Columbia Business School. Prof. Wang paid homage to Prof. Hansen’s profound influence on his academic journey, hailing him as a teacher, mentor, and friend. The introductory discourse underscored Prof. Hansen’s seminal contributions to the economic landscape, notably the epochal development of the Generalized Method of Moments (GMM) technique.

The focal point of Prof. Hansen’s keynote address bore the theme “How Should Climate Change Uncertainty Impact Social Valuation and Policy?” This captivating exposition delved into the intricate interplay between the enigma of climate change uncertainty, its implications on societal valuation, and the strategic underpinnings of policy formulation. Prof. Hansen masterfully navigated through the realms of decision theory, dissecting concepts of risk, ambiguity, and misspecification. He eloquently argued for the adoption of simplified models as robust tools to tackle these multifaceted challenges head-on. The discourse further probed the terrain of asset pricing valuation, accentuating the indispensability of recalibrating valuation mechanisms to accommodate uncertainty. Prof. Hansen spotlighted two pivotal facets within this context: the assets burdened with the societal cost of carbon and those enriched by the societal value of research and development. He accentuated the imperative of weaving the fabric of decision theory into the very essence of valuation, necessitating nuanced adjustments for uncertain cash flows, ambiguous probabilities, and uncertain discount rates.

The conference’s continuum embraced two engrossing panel discussions, pulsating with insights on pertinent topics. The first panel, bearing the intriguing epithet “Risk Landscape – The Year of Inflection,” convened luminaries to delve into the crucible of escalating geopolitical perturbations, tectonic shifts in monetary policy contours, and the burgeoning prominence of operational risks, typified by the specter of cyber threats. The panelists, including Mr. David Dredge, Chief Investment Officer of Convex Strategies Pte Ltd, Mr. Philip Fernandez, Corporate Treasurer of DBS Group, and Ms. Jayne Plunkett, Group Chief Risk Officer of AIA Group, collectively illumined the strategies undertaken by risk practitioners in the global financial ecosystem to grapple with this year of epochal inflection. The session found its astute helmsman in Mr. Lutfey Siddiqi, an erudite Adjunct Professor at NUS RMI.

The conference hosted three keynote speakers. The first was Professor Zhou Xunyu, Chair Professor of Financial Engineering in the Department of Industrial Engineering and Operations Research at Columbia University and Director of the FDT Center for Intelligent Asset Management. During his keynote speech, Prof. Zhou introduced his research results of "Reinforcement Learning in Continuous Time and Its Financial Applications". He pointed out that reinforcement learning, through randomized exploration, can balance exploration and the utilization of learned knowledge without knowing the environment model, and can excellently solve stochastic control problems. However, existing reinforcement learning methods mainly focus on discrete-time Markov decision-making problems, which are difficult to solve problems that require high-frequency interaction with the environment, and lack a theory and unified framework. To this end, Prof. Zhou proposed a continuous-time reinforcement learning framework through a series of papers: including the introduction of a random strategy that embodies exploration through the conditional probability distribution of actions under the continuous-time model, and the solution of continuous-time stochastic control problems under the random strategy. He applied the method to the mean-variance portfolio selection problem and found that its performance on the S&P 500 portfolio and the CSI 300 portfolio outperformed the market and other discrete-time reinforcement learning methods. After the keynote speech, the participants discussed topics such as exploration rate selection in reinforcement learning.

The second keynote talk was by Professor Darrell Duffie, Adams Distinguished Professor of Management and Professor of Finance at the Stanford Graduate School of Business, and Senior Fellow at the Institute for Economic Policy Research at Stanford University. The title of Professor Duffie's speech was "Dealer Intermediation Capacity and US Treasury Market Functionality". Professor Duffie conducted data analysis on the U.S. Treasury bond market and found that during the COVID-19 pandemic, the number of U.S. Treasury bonds sold by foreign investors and dealer bid-ask spreads surged, and the liquidity of the U.S. Treasury bond market and the market depth among dealers plummeted. He pointed out that the U.S. Treasury bond trading market consists of two parts, namely the inter-dealer market and the market between investors and dealers. The resilience of the U.S. Treasury bond market is limited by the intermediary capabilities of dealers. Under normal circumstances, the illiquidity of U.S. Treasury bonds increases linearly with the increase in the implied volatility of interest rate swap options; however, in the extreme case of the COVID-19 pandemic, this linear relationship does not hold because the balance sheets of dealers during the outbreak Table capacity has been exhausted and therefore cannot continue to provide liquidity to investors. Professor Duffie gave policy suggestions on this issue. He suggested that the central bank monitor the balance sheet capacity of dealers, proposed an improved treasury bond auction mechanism, and advised the central bank to distinguish between market function purchases and quantitative easing. After the speech, everyone discussed topics such as the auction mechanism of the U.S. Treasury bond market, how to distinguish market function purchases from quantitative easing, and the Chinese bond market.

The last keynote talk was by Professor Rama Cont, Chair Professor of Mathematics and Head of the Mathematics and Computational Finance Group at the Institute of Mathematics, University of Oxford. In a presentation titled "Excursion Risk: A New Approach to the Analysis of Dynamic Trading Strategies," Professor Cont discussed trading signals, which are market prices of a portfolio relative to the ones based on the deviation of the reference price, a new method for risk analysis of dynamic trading strategies is proposed. He defines delta-shift as the path of a trading signal that starts at 0 and then reaches the level delta before returning to 0. Professor Cont pointed out that each continuous path can be uniquely decomposed into a delta-shift connection, which is very useful for scenario analysis of dynamic trading strategies, and can obtain simple expressions for the number of transactions, realized profits, maximum losses and retracements. When trading signals follow a Markov process, the trading signal process can be decomposed into a connection of independent delta-shifts, whose distribution is described by the shift measure. Professor Cont obtained the analytical results of trading strategy risk analysis under the linear diffusion process model, and gave a flexible and mathematically easy-to-calculate method to construct a new stochastic process based on offsets. After the speech, everyone discussed the optimal trading signal level and the smoothness of the trading signal path in high-frequency trading.

The organizers of this conference also selected 50 high-quality academic papers from numerous submissions and invited the authors to attend the conference to present and discuss these papers in several tracks. These papers covered topics such as microeconomics, financial modeling, econometrics, portfolio selection, macroeconomics and monetary economics, financial markets and microeconomics, macroeconomics under information friction, algorithmic trading and actuarial science, financial engineering and Main areas such as financial technology.

The conference attracted speakers and participants from prestigious universities such as University of Cambridge, the University of Oxford, the University of North Carolina, the University of Illinois, Arizona State University, the National University of Singapore, Peking University, Tsinghua University, the University of Hong Kong, the Hong Kong University of Science and Technology, the Chinese University of Hong Kong, City University of Hong Kong, Zhejiang University, and Fudan University.